Use the following information for the next four items:

On July 1, 2020, Onyx Corporation issued 5,000 of its 6-year, P1,000 face value, 10% convertible bonds dated July 1 at 104, at an effective annual interest rate (yield) of 12% (without the bond conversion privilege). Interest is payable every June 30 and December 31. The bonds are convertible at the investor's option into Onyx's common stock at a ratio of 10 shares of common stock for each bond. On July 1, 2021, an investor in Onyx's convertible bonds tendered 2,000 bonds for conversion into 20,000 shares of Pimento's common stock, which had a fair market value of P105 and a par value of P10 at the date of conversion.

Note: Round off present value factors to four decimal places (x.xxxx). Round off amounts to the nearest peso.

Based on the above information, answer the following:

1. How much is the premium or discount on bonds payable on the date of issuance?
2. How much is the bond conversion privilege recognized upon issuance of the convertible bonds on July 1, 2020?
3. How much is the share premium from the issuance of common stock on July 1, 2021?
4. How much is the interest expense for the year ended December 31, 2021?

PROBLEM 2

Slate Black Corporation is having financial difficulty and therefore has asked Stout National Bank to restructure its P5,000,000 note outstanding. Slate Black also has an unpaid interest of P500,000. The present note has 3 years remaining and pays a current rate of interest of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value.

Stout National Bank agrees to take an equity interest in Slate Black by accepting ordinary shares. The fair value of the ordinary shares cannot be measured reliably on the date of issuance. The ordinary shares have a par value of P2,500,000. The fair value of the liability is P4,900,000.

How much is the gain or loss from extinguishment of debt?

Note: Gains are denoted as positive values while losses are denoted as negative values.

ANSWER ONLY