Items 1 to 4 are based on the following information. On December 31, 2020, Fuslie Company issued P5,000,000 face amount, 5-year bonds at 109. Each P1,000 bond was issued with 10 share warrants, each of which entitled the bondholder to purchase one share of P100 par value at P120. Immediately after issuance, the market value of each warrant was P5. The stated interest rate on the bonds is 11% payable annually, every December 31. However, the prevailing market rate of interest for similar bonds without warrants is 12%. Note: Round-off present value factors to two (2) decimal places.
Items 1 to 4 are based on the following information. On December 31, 2020, Fuslie Company issued P5,000,000 face amount, 5-year bonds at 109. Each P1,000 bond was issued with 10 share warrants, each of which entitled the bondholder to purchase one share of P100 par value at P120. Immediately after issuance, the market value of each warrant was P5. The stated interest rate on the bonds is 11% payable annually, every December 31. However, the prevailing market rate of interest for similar bonds without warrants is 12%. Note: Round-off present value factors to two (2) decimal places.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter20: Hybrid Financing: Preferred Stock, Warrants, And Convertibles
Section: Chapter Questions
Problem 1P: Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually...
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2. On December 31,2020, what amount should be recorded as discount or premium on bonds payable?
A. 170,000 discount
B. 450,000 premium
C. 450,000 discount
D. 800,000 discount
E. None of the above
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