HOMEWORK ON BONDS PAYABLE - HOMEWORK ON BONDS PAYABLE 1...

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1 HOMEWORK ON BONDS PAYABLE 1. During 2016, New York Company incurred the following costs in connection with the issuance of bonds: Printing and engraving P 85,000 Legal expenses 325,000 Fees paid to independent accountants for registration information 65,000 Commissions paid to underwriters 310,000 How much should be recorded as bond issue cost to be amortized over the term of the bonds? 2. On February 1, 2016, New Mexico Company issued a P3,000,000 of 12% bonds at 104 which are due on January 31, 2020. In addition, each P1,000 bond was issued 15 warrants, each of which entitles the bondholder to purchase for P50 one ordinary share (P25 par value) of the company. On February 1, 2016, the fair market value of the ordinary share was P40 per share; the fair market value of the warrant was P4; and the fair market value of the bond ex-warrant was 101. (a) How much should the company record on February 1, 2016 as carrying value of the bonds? (b) How much of the amount received on the date of issuance is attributable to the equity component?
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