On January 1, 2020, Shredder Company Issued its 10%, 4-year convertible debt instrument with a face amount of P3,000,000 for P3,500,000. Interest is payable every December 31 of each year. The debt instrument is convertible into 30,000 ordinary shares with a par value of P100. The debt instrument is convertible into equity from the time of issue until maturity. When debt instruments were issued, the prevailing market rate of interest for similar debt without conversion option is 8%. PV of 8% for an ordinary annuity of P1 after 4 periods 3.3121268 PV of 8% after 4 interest periods .7350298 On December 31, 2022, Shredder Company converted all the debt instruments by issuing 30,000 ordinary shares. 1. What is the carrying value of the compound instruments as of December 31, 2022? 2. What is the amount of interest expense should the company report in the Dec. 31, 2021 profit or loss?
On January 1, 2020, Shredder Company Issued its 10%, 4-year convertible debt instrument
with a face amount of P3,000,000 for P3,500,000. Interest is payable every December 31 of
each year. The debt instrument is convertible into 30,000 ordinary shares with a par value of
P100. The debt instrument is convertible into equity from the time of issue until maturity. When
debt instruments were issued, the prevailing market rate of interest for similar debt without
conversion option is 8%.
PV of 8% for an ordinary annuity of P1 after 4 periods 3.3121268
PV of 8% after 4 interest periods .7350298
On December 31, 2022, Shredder Company converted all the debt instruments by issuing
30,000 ordinary shares.
1. What is the carrying value of the compound instruments as of December 31, 2022?
2. What is the amount of interest expense should the company report in the Dec. 31,
2021 profit or loss?
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