CHAPTER NON-CURRENT LIABILITIES PROBLEMS 2-1 (Ruby Corporation) At 8% Bond issue price Nominal interest for 2012 Interest expense for 2012 Premium/discount amortization in 2012 Bond carrying value at December 31, 2012 Nominal interest for 2013 Interest expense for 2013 Premium/discount amortization in 2013 Bond carrying value at December 31, 2013 1,081,145 50,000 43,246 6,754 1,074,391 100,000 85,671 14,059 1,060,332 At 12% 926,405 50,000 55,584 5,584 931,989 100,000 112,193 12,193 944,182 Computations: At 8% Issue price = (1,000,000 x 0.6756) + (50,000 x 8.1109) = 675,600 + 405,545 = 1,081,145 Date A Interest Paid B Interest Expense C Premium Amortization 06/30/12 12/31/12 06/30/13 12/31/13 50,000 50,000 50,000 43,246 42,976 42,695 6,754 7,024 7,035 A B = = D Bond Carrying Value 1,081,145 1,074,391 1,067,367 1,060,332 Face value x 5% Carrying value, beg of year x 4% At 12% Issue price = (1,000,000 x 0.5584) + (50,000 x 7.3601) = 558,400 + 368,005 = 926,405 Date A Interest Paid B Interest Expense C Discount Amortization D Bond Carrying Value 06/30/12 12/31/12 06/30/13 12/31/13 50,000 50,000 50,000 55,584 55,919 56,274 5,584 5,919 6,274 926,405 931,989 937,908 944,182 2-2 (Fire Company) Correction to the text: A = 5% x face value B = 4% of previous carrying value (a) Issue price Present value of face value (4,000,000 x 0.6756) Present value of interest payments (200,000 x 8.1109) Issue price P2,702,400 1,622,180 P4,324,580 Chapter - Non-Current Liabilities (b) Amortization Table Date 3/01/12 8/31/12 2/28/13 8/31/13 2/28/14 (c) 03/01/12 08/31/12 12/31/12 02/28/13 2-3 Interest Expense 172,983 171,903 170,779 169,610 Premium Amortization 27,017 28,097 29,221 30,390 Cash Bonds Payable Premium on Bonds Payable Bond Carrying Value 4,324,580 4,297,563 4,269,466 4,240,245 4,209,855 4,324,580 4,000,000 324,580 Interest Expense Premium on Bonds Payable Cash 172,983 27,017 Interest Expense (171,903 x 4/6) Premium on Bonds Payable Interest Payable (320,000 x 4/6) 114,602 18,731 Interest Expense (171,903 – 114,602) Premium on Bonds Payable (28,097 – 18,731) Interest Payable Cash 200,000 133,333 57,301 9,366 133,333 200,000 (Metal Corporation) Issue price of bonds and warrants 5,000,000 x 1.08 MV of bonds without warrants 5,000,000 x 1.02 Value assigned to warrants (a) (b) 2-4 Interest Paid 200,000 200,000 200,000 200,000 (Onyx) (a) 5,400,000 5,100,000 P 300,000 Cash Premium on Bonds Payable Bonds Payable Share Warrants Outstanding 5,400,000 Cash (5,000 x x 140) Share Warrants Outstanding Ordinary Shares (5,000 x x 100) Share Premium 1,400,000 300,000 100,000 5,000,000 300,000 1,000,000 700,000 Issue price of bonds with warrants (1,000,000 x 1.03) Bond price without warrants 1,000,000 x 0.3220 100,000 x 5.6502 Value of share warrants 12 322,000 565,020 1,030,000 887,020 142,980 Chapter - Non-Current Liabilities (b) Interest Expense for 2012 (887,020 x 12% x 10/12 (c) Bond carrying value, March 1, 2012 Amortization through December 31, 2012 887,020 x 12% x 10/12 1,000,000 x 12% x 10/12 Bond carrying value, December 31, 2012 (d) 2-5 887,020 88,702 83,333 Cash (1,000 x 30 x 50) Share Warrants Outstanding Ordinary Share (30,000 x 25) Share Premium 5,369 892,389 1,500,000 142,980 750,000 892,980 (Celeron Company) (a) Issue price of convertible bonds Issue price of bonds without conversion privilege 2,000,000 x 0.5674 1,134,800 200,000 x 3.6048 720,960 Allocation to equity (b) 88,702 2,000,000 1,855,760 144,240 Amortization Table Interest Interest Date Paid Expense 07/01/12 06/30/13 200,000 222,691 06/30/14 200,000 225,414 06/30/14 06/30/14 06/30/15 80,000 91,386 06/30/16 80,000 92,572 06/30/17 80,000 94,316* *Adjusted; difference is due to rounding off (c) 07/01/12 Premium Amortization 22,691 25,414 Cash Discount on Bonds Payable Bonds Payable 11,386 12,752 14,316 2,000,000 144,240 2,000,000 144,240 PIC Arising from Bond Conversion Privilege 06/30/13 06/30/14 06/30/14 Interest Expense Discount on Bonds Payable Cash 222,691 Interest Expense Discount on Bonds Payable Cash 225,414 Bonds Payable PIC Arising from Conversion Privilege Discount on Bonds Payable Ordinary Share Share Premium 13 Bond Carrying Value 1,855,760 1,878,451 1,903,865 (1,142,319) 761,546 772,932 785,684 800,000 22,691 200,000 25,414 200,000 1,200,000 86,544 57,681 960,000 268,863 Chapter - Non-Current Liabilities Carrying value,bonds converted (1,903,865 x 120/200 Face value of bonds converted Discount on bonds payable cancelled Value of equity converted (144,240 x 120/200) Par value of ordinary shares issued (120 x 80 x 100) 06/30/15 06/30/16 06/30/17 06/30/17 Interest Expense Discount on Bonds Payable Cash 91,386 Interest Expense Discount on Bonds Payable Cash 92,752 Interest Expense Discount on Bonds Payable Cash 94,316 1,142,319 1,200,000 57,681 86,544 960,000 11,386 80,000 12,752 80,000 14,316 80,000 Bonds Payable 800,000 57,696 PIC Arising from Bond Conversion Privilege Cash PIC from Unexercised Bond Conversion Privilege 800,000 57,696 (144,240 – 86,544) 2-6 (Iron Company) Bonds Payable Premium on Bonds Payable (450,000 x 2/20) PIC Arising from Bond Conversion Privilege(320,000 x 2/20) 2,000,000 45,000 32,000 Ordinary Shares (1,000 x 60 x 20) Share Premium 2-7 1,200,000 877,000 (Lim Corporation) (a) Cash Bonds Payable Premium on Bonds Payable 5,500,000 5,000,000 200,000 300,000 PIC Arising from Bond Conversion Privilege (b) Bonds Payable Premium on Bonds Payable (5,000 x 1/5) PIC Arising from Bond Conversion Privilege 1,000,000 10,000 60,000 Ordinary Share (200 x 40 x 100) Share Premium 300,000 x 1/5 = 60,000 (c) Bonds Payable Premium on Bonds Payable (5,000 x 2/5) PIC Arising from Bond Conversion Privilege Cash (2,000,000 x 1.04) Gain on Retirement of Bonds PIC from Unexercised Bond Conversion Privilege 14 800,000 270,000 2,000,000 20,000 120,000 2,080,000 10,000 50,000 Chapter - Non-Current Liabilities Retirement price 2,080,000 Retirement price on account of liability 2,000,000 x 1.005 Retirement price on account of equity Carrying value of bonds retired Face value Unamortized premium (50,000 x 2/5) Retirement price of bonds (2M x 1.005) Gain on retirement of bonds 2,010,000 70,000 2,000,000 _20,000 2,020,000 2,010,000 10,000 Carrying value of equity cancelled Retirement price on account of equity Gain on cancellation taken to equity 2-8 120,000 70,000 50,000 (Emerald Corporation) The following table may facilitate the computations required in this problem Date 12/01/12 06/01/13 12/01/13 06/01/14 12/01/14 06/01/15 12/01/15 06/01/16 12/01/16 06/01/17 12/01/17 Interest Paid 300,000 300,000 300,000 300,000 300,000 180,000 180,000 180,000 180,000 180,000 Interest Expense 269,304 267,769 266,157 264,465 262,688 156,494 155,318 154,084 152,788 151,443* Premium Amortization 30,696 32,231 33,843 35,535 37,312 23,506 24,682 25,916 27,212 28,557 Bond Carrying Value 5,386,072 5,355,376 5,323,145 5,289,302 5,253,767 5,216,455 3,106,367 3,081,685 3,055,769 3,028,557 3,000,000 *Adjusted; difference is due to rounding off (a) Carrying value, December 1, 2013 (see, table) Amortization for one month (33,843 x 1/6) Carrying value, December 31, 2013 (b) (c) Interest Expense for year 2013 January 1-June 1, 2013 (269,304 x 5/6) June 1-December 1, 2013 December 1-31, 2013 (266,157 x 1/6) Total 224,420 267,769 _44,360 536,549 Carrying value of bonds retired on December 1, 2014 5,253,767 x 2/5 Amortization through April 1, 2015 (37,312 x 4/6 x 2/5) Carrying value of bonds retired on April 1, 2015 (d) 5,323,145 5,640 5,317,505 Carrying value of bonds retired Redemption price (2,000,000 x 1.04) Gain on redemption of bonds 15 2,101,507 9,950 2,091,557 2,091,557 2,080,000 11,557 Chapter - Non-Current Liabilities (e) Carrying value of remaining bonds, December 1, 2015 Amortization through December 31, 2015 (24,682 x 1/6) Carrying value of remaining bonds, December 31, 2015 (f) On bonds redeemed: January 1-April 1, 2013 (262,688 x 2/5 x 3/6) 3,106,367 4,114 3,102,253 2015 52,538 2016 On remaining bonds January 1-June 1, 2013 (262,688 x 3/5 x 5/6) June 1-December 1, 2015 December 1-31, 2015 (155,318 x 1/6) January 1-June 1, 2016 (155,318 x 5/6) June 1-December 1, 2016 December 1-31, 2016 (152,788 x 1/6) Interest Expense 2-9 (Ohio Company) Date 01/02/12 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 131,344 156,494 25,886 366,262 129,432 154,084 25,465 308,981 Partial Amortization Table Interest Paid 1,200,000 1,200,000 1,200,000 1,200,000 600,000 600,000 Interest Expense 1,014,730 999,908 983,901 966,613 473,971 463,889 Premium Amortization 185,270 200,092 216,099 233,387 126,029 136,111 Bond Carrying Value 12,684,120 12,498,850 12,298,758 12,082,659 11,849,272 5,798,607 5,662,496 (a) Effective interest (12,734,120 – 50,000) x 8% Nominal interest (10,000,000 x 12%) Amortization of premium for 2012 (b) Carrying value of bonds on December 31, 2015 (see table) (c) Carrying value of bonds called (11,849,272 x 5/10) Call price/retirement price (5,000,000 x 110%) Gain on retirement of bonds (d) Interest Expense for year 2016 (see table) (e) Unamortized premium on bonds payable, Dec 31, 2016 5,798,605 – 5,000,000 1,014,730 1,200,000 185,270 11,849,272 5,924,636 5,500,000 424,636 473,971 798,605 2-10 (Sim Company) Partial Amortization Table Date 03/01/12 09/01/12 03/01/13 09/01/13 03/01/14 09/01/14 03/01/15 09/01/15 Nominal Interest Effective Interest Premium Amortization 85,000 85,000 85,000 85,000 85,000 85,000 85,000 88,335 88,485 88,642 88,806 88,977 89,156 89,343 3,335 3,485 3,642 3,806 3,977 4,156 4,343 16 Bond Carrying value P1,963,000 1,966,335 1,969,820 1,973,462 1,977,268 1,981,245 1,985,401 1,989,744 Chapter - Non-Current Liabilities (a) Interest expense recorded on September 1, 2012 Discount amortization recorded on September 1, 2012 (b) Carrying amount of the bonds, September 1, 2012 88,335 3,335 Carrying amount of the bonds, December 31, 2012 1,966,335 2,323 1,968,658 (c) Retirement price (at face value) Accrued interest (2,000,000 x 8.5% x 4/12) Amount of cash paid on June 30, 2015 2,000,000 56,667 2,056,667 (d) Carrying value, March 1, 2015 (see table) Amortization through June 30, 2015 (4,343 x 4/6) Carrying value, June 30, 2015 Retirement price (at face value) Loss on retirement of bonds 1,985,401 2,895 1,988,296 2,000,000 11,704 Amortization through December 31, 2010 (3,485 x 4/6) 2-11 (Kim Company) (a) Issue price of the bonds Principal Due Date Due 12/31/13 2,000,000 12/31/14 2,000,000 12/31/15 2,000,000 12/31/16 2,000,000 12/31/17 2,000,000 Selling price of bonds (b) Principal Due Interest Due 800,000 640,000 480,000 320,000 160,000 Amount Due 2,800,000 2,640,000 2,480,000 2,320,000 2,160,000 Amortization Table Interest Effective Due Interest Due Date 12/31/12 12/31/13 2,000,000 800,000 1,088,392 12/31/14 2,000,000 640,000 882,999 12/31/15 2,000,000 480,000 672,159 12/31/16 2,000,000 320,000 455,218 12/31/17 2,000,000 160,000 231,296 *Adjusted; difference is due to rounding off PV Factor 0.8929 0.7972 0.7118 0.6355 0.5674 Present Value 2,500,120 2,104,608 1,765,264 1,474,360 1,225,584 P9,069,936 Discount Amortization 288,392 242,999 192,159 135,218 71,296* Carrying Value, end P9,069,936 7,358,328 5,601,327 3,793,486 1,928,704 -0- (c) 12/31/12 12/31/13 12/31/14 Cash Discount on Bonds Payable Bonds Payable 9,069,936 930,064 Interest Expense Discount on Bonds Payable Cash 1,088,392 Bonds Payable Cash 2,000,000 10,000,000 288,392 800,000 2,000,000 Interest Expense Discount on Bonds Payable Cash Bonds Payable Cash 882,999 242,999 640,000 2,000,000 2,000,000 17 Chapter - Non-Current Liabilities 2-12 (Blue Sapphire Corporation) (a) Issue price of the bonds Due Date 12/31/12 12/31/13 12/31/14 12/31/15 Selling price Principal Due 2,000,000 2,000,000 2,000,000 2,000,000 of bonds (b) Principal Due Interest Due 960,000 720,000 480,000 240,000 Amount Due 2,960,000 2,720,000 2,480,000 2,240,000 Amortization Table Interest Effective Due Interest Due Date 01/01/12 12/31/12 2,000,000 960,000 12/31/13 2,000,000 720,000 12/31/14 2,000,000 480,000 12/31/15 2,000,000 240,000 *Adjusted; difference is due to rounding off PV Factor 0.9259 0.8573 0.7938 0.7355 Present Value 2,740,664 2,331,856 1,968,624 1,646,400 P8,687,544 Discount Amortization 695,004 513,804 337,308 166,340* 264,996 206,196 142,692 73,660 Carrying Value, end 8,687,544 6,422,548 4,216,352 2,073,660 -0- (c) 01/01/12 12/31/12 Cash Bonds Payable Premium on Bonds Payable Interest Expense Premium on Bonds Payable Cash Bonds Payable Cash 12/31/13 8,687,544 8,000,000 687,544 695,004 264,996 960,000 2,000,000 2,000,000 Interest Expense Premium on Bonds Payable Cash Bonds Payable Cash 513,804 206,196 720,000 2,000,000 2,000,000 2-13 (KFC Delivery Service) (a) 6,949,800/9,000,000 = 0.7722 This present value factor for three periods is under the rate of 9% (Table II, Present Value of a Single Payment) Hence, effective interest for this transaction is 9% (b) Date 09/01/12 08/31/13 08/31/14 08/31/15 Amortization 9% x 6,949,800 = 625,482 9% x 7,575,282 = 681,775 9% x 8,257,057 = 742,943* *Adjusted; difference is due to rounding off 18 Carrying Value of Note 6,949,800 7,575,282 8,257,057 9,000,000 Chapter - Non-Current Liabilities (c) Interest expense for 2012 (625,482 x 4/12) 208,494 Carrying value, September 1, 2012 Amortization through December 31, 2012 Carrying value, December 31, 2012 (d) 09/01/12 12/31/12 09/01/13 12/31/13 09/01/14 12/31/14 08/31/15 Land Discount on Notes Payable Notes Payable 6,949,800 208,494 7,158,294 6,949,800 2,050,200 9,000,000 Interest Expense Discount on Notes Payable 208,494 Interest Expense (625,482 -208,494) Discount on Notes Payable 416,988 Interest Expense (681,775 x 4/12) Discount on Notes Payable 227,258 Interest Expense (681,775 – 227,258) Discount on Notes Payable 454,517 Interest Expense (742,943 x 4/12) Discount on Notes Payable 247,648 Interest Expense (742,943 – 247,648) Discount on Notes Payable 495,295 208,494 Notes Payable Cash 416,988 227,258 454,517 247,648 495,295 9,000,000 9,000,000 2-14 (JFC) (a) 2012 6,949,800 x 9%= 625,482 625,482 x 4/12 625,482 x 8/12 6,949,800 x 1.09 = 7,575,282 7,575,282 x 9%= 681,775 681,775 x 4/12 681,775 x 8/12 7,575,282 x 1.09 = 8,257,057 8,257,057 x 9%= 743,135 743,135 x 4/12 Totals 2013 2014 208,494 416,988 227,258 454,517 _ 208,494 _ 644,246 247,712 702,229 (b) Notes Payable Accrued interest (208,494 + 644,246) Total, December 31, 2013 6,949,800 852,740 7,802,540 (c) Non-current Liabilities Notes Payable Accrued interest (208,494 + 644,246) December 31, 2013 6,949,800 852,740 7,802,540 19 Chapter - Non-Current Liabilities Current Liabilities Notes Payable Accrued interest Total, December 31, 2014 6,949,800 1,554,969 8,504,769 (d) 09/01/12 12/31/12 12/31/13 12/31/14 12/31/15 Land Notes Payable 6,949,800 6,949,800 Interest Expense Interest Payable 208,494 Interest Expense Interest Payable 644,246 Interest Expense Interest Payable 702,229 208,494 644,246 702,229 Interest Expense (adjusted) Interest Payable Notes Payable Cash 2-15 (Wendy’s Catering Service) (a) Present value of note (800,000 x 3.2397) (b) Date Principal Due 4/01/12 3/31/13 3/31/14 3/31/15 3/31/16 *Adjusted; Amortization 800,000 233,258 800,000 182,252 800,000 126,654 800,000 66,076* difference is due to rounding off 495,423 1,554,969 6,949,800 9,000,192 2,591,760 Carrying Value of Note 2,591,760 2,025,018 1,407,270 733,924 -0- (c) 04/01/12 12/31/12 03/31/13 Equipment Discount on Notes Payable Notes Payable 2,591,760 608,240 3,200,000 Interest Expense (233,258 x 9/12) Discount on Notes Payable 174,944 Notes Payable Interest Expense Cash 800,000 58,314 174,944 800,000 58,314 Discount on Notes Payable (233,258-174,944) 12/31/13 03/31/14 Interest Expense (182,252 x 9/12) Discount on Notes Payable 136,689 Notes Payable Interest Expense Cash 800,000 45,463 Discount on Notes Payable (182,252-136,689) 20 136,689 800,000 45,563 Chapter - Non-Current Liabilities 12/31/14 03/31/15 Interest Expense (126,654 x 9/12) Discount on Notes Payable 94,991 94,991 Notes Payable Interest Expense Cash 800,000 31,663 800,000 31,663 Discount on Notes Payable (126,654-94,991) 12/31/15 03/31/16 Interest Expense (66,076 x 9/12) Discount on Notes Payable 49,557 49,557 Notes Payable Interest Expense Cash 800,000 16,519 800,000 16,519 Discount on Notes Payable (66,076-49,557) 2-16 (Burgee’s Food Corporation) (a) Date 04/01/12 03/31/13 03/31/14 03/31/15 03/31/16 Annual Payment Interest Principal Payment 800,000 800,000 800,000 800,000 233,258 182,252 126,654 66,076* 566,742 617,748 673,346 733,924 *Adjusted (b) 04/01/12 Equipment Notes Payable 12/31/12 04/01/13 12/31/13 04/01/14 12/31/14 04/01/15 12/31/15 Carrying Value 2,591,760 2,025,018 1,407,270 733,924 -0- 2,591,760 2,591,760 Interest Expense (233,258 x 9/12) Interest Payable 174,944 Interest Payable Interest Expense (233,258 – 174,944) Notes Payable Cash 174,944 58,314 566,748 Interest Expense (182,252 x 9/12) Interest Payable 136,689 Interest Payable Interest Expense (182,252 – 136,689) Notes Payable Cash 136,689 45,563 617,748 Interest Expense (126,654 x 9/12) Interest Payable Interest Payable Interest Expense (126,654 – 94,991) Notes Payable Cash Interest Expense (66,076 x 9/12) Interest Payable 21 174,944 800,000 136,689 800,000 94,991 94,991 94,991 31,663 673,346 800,000 49,557 49,557 Chapter - Non-Current Liabilities 04/01/14 (c) Interest Payable Interest Expense (66,076 – 49,557) Notes Payable Cash 49,557 16,519 733,924 800,000 Current portion at December 31, 2013 Notes Payable Interest Payable 617,748 136,689 Noncurrent portion at December 31, 2013 Notes Payable 1,407,270 2-17 (a) (b) (c) (South Company) Notes Payable Interest Payable Cost of Sales Inventory of Machine Parts Sales Gain on Debt Restructuring (Joy Company) Bonds Payable Interest Payable Ordinary Share Share Premium 30,000 x (30-25) Gain on Debt Restructuring (Capshell Company) Notes Payable Interest Payable Restructured Notes Payable Gain on Debt Restructuring (see computations and explanation below) Present value of future payments at historical rate: 8,000,000 x 0.7972 = 6,377,600 8,000,000 x 8% x 1.6901 = 1,081,664 Total 7,459,264 Carrying value of liability 11,200,000 Difference 3,740,736 3,740,736/11,200,000 = 33%, thus the restructuring qualifies as a derecognition of the old liability and creation of a new liability The old liability shall be cancelled; the new liability shall be measured based on the discounted cash flow of the future payments based on the entity’s incremental borrowing rate considering its credit rating: 22 900,000 90,000 650,000 650,000 800,000 190,000 10,000,000 900,000 7,500,000 150,000 3,250,000 10,000,000 1,200,000 7,332,384 3,867,616 Chapter - Non-Current Liabilities Present value of future payments at incremental borrowing rate, considering its credit rating: 8,000,000 x 0.7831 = 6,264,800 8,000,000 x 8% x 1.6681 = 1,067,584 Total 7,332,384 Carrying value of the old 11,200,000 Gain on debt restructuring 3,867,616 (d) Alternatively, the entry may be recorded as: Notes Payable 10,000,000 Interest Payable 1,200,000 Discount on Restructured Notes Payable 667,616 Restructured Notes Payable Gain on Debt Restructuring 8,000,000 3,867,616 (Solid Company) Notes Payable Interest Payable Restructured Notes Payable Deferred Gain on Debt Restructuring 3,111,024 218,976 3,000,000 330,000 Present value of future payments 3,000,000 x 0.5935 = 1,780,500 3,000,000 x 12% x 3.6959 = 1,330,524 Total 3,111,024 Carrying value of liability 3,330,000 Difference 218,976 218,976/3,330,000 < 10% of 3,330,000 Thus, the debt restructuring does not qualify for derecognition of the old obligation No gain shall be recognized and a new effective interest rate shall be computed Alternatively, the restructuring may recorded as: Notes Payable Interest Payable Premium on Restructured Notes Payable Restructured Notes Payable Deferred Gain on Debt Restructuring 23 be 3,000,000 330,000 111,024 3,000,000 218,976 Chapter - Non-Current Liabilities MULTIPLE CHOICE QUESTIONS Theory MC1 MC2 MC3 MC4 MC5 MC6 MC7 MC8 D D D C D D D C MC11 MC12 MC13 MC14 MC15 MC16 MC17 MC18 MC9 D MC10 C Problems MC19 MC20 MC21 MC22 MC23 MC24 MC25 MC26 MC27 MC28 MC29 MC30 B D B A B B C A B D MC31 D MC32 MC33 MC34 MC35 C A A B MC36 MC37 C A MC38 MC39 C D MC40 MC41 B D MC42 MC43 MC44 MC45 B A D D MC46 MC47 C B MC48 B C B B D B D D B plus the PV of all at effective rate (supposedly A) A D (1,000,000 x 0.38554) + (80,000 x 6.14457) = 877,106 (1,000 x 0.31) + (40 x 11.47) = 768.80 (2,000,000 x 97%) + (2,000,000 x 10% x 3/12) = 1,990,000 (2,000 X 1,040) - 2,000,000 = 80,000 (4,000,000 x 97%) + (4,000,000 x 12% x 3/12) = 4,000,000 1,070,000 - (96% x 1,000,000) = 110,000 1,000,000 x 12% x 1/12 = 10,000 (1,000,000 x 1.02) – 50,000 = 970,000 1,000,000 - 30,000 + 50,000 = 1,020,000; 1,020,000 - (40,000 x 20) - 10,000 = 210,000 Use the book value method; no gain or loss is recorded upon conversion; the conversion is in accordance with the original terms of the bond; thus, IFRIC 19 does not apply 1,032,880 x 10% x 6/12 = 51,644 1,032,880 - {(1,000,000 x 6%) - 51,644}= 1,024,524 1,878,000 - {(10% x 1,878,000) -(2,000,000 x 9%) = 1,885,800 10,000,000 – 1,145,000 = 8,855,000; (8,855,000 x 6%) - (10,000,000 x 5%) = 31,300 5,680,000 x 8% x 6/12 = 227,200 (2,100,000 x 6%) – (2,000,000 x 7%) = 14,000; 2,100,000 – 14,000 = 2,086,000 BCV; BCV of P2,086,000 – face value of P2,000,000 = P86,000 premium 1,032,880 x 10% = 103,288 1,902,800 x 10% = 190,280 effective interest; 190,280 effective interest – nominal interest of 160,000=30,280 discount amortization; carrying value = 1,902,800 + 30,280 – principal payment of 400,000 = 1,533,080 2,400,000 X 12% = 288,000 2,400,000 – 1,000,000 + 288,000 = 1,688,000 1,688,000 X 12% = 202,560; 1,000,000 – 202,560 = 797,440 3,000,000 – 2,400,000 = 600,000; 600,000 – 288,000 = 312,000 (1) 49,737 X 10%= 4,974; 49,737 – (20,000 – 4,974) = 34,711 5,500,000 – 3,000,000 = 2,500,000 6,000,000 + 600,000 = 6,600,000 (6000,000 x 0.621) +(6000,000 x 12% x 3.791) = 6,455,520 6,600,000 – 6455,520= 144,480, which is less than 10% of 6,600,000; no gain is recognized 6,600,000 – [(5,000,000 x 6209) +(5,000,000 x 12 x 3.7908)] =1,221,020 8,000,000 + 640,000 = 8,640,000 (6,000,000 x 0.8573) + (6,000,000 x 10% x 1.7833) = 6,213,780 8,640,000 – 6,213,780 = 2,426,220 150,000 x 65 = 9,750,000; 11,000,000 – 9,750,000 = 1,250,000 24 Chapter - Non-Current Liabilities 25 ... 9,000,000 2- 1 4 (JFC) (a) 20 12 6,949,800 x 9%= 625 ,4 82 625 ,4 82 x 4/ 12 625 ,4 82 x 8/ 12 6,949,800 x 1.09 = 7,575 ,28 2 7,575 ,28 2 x 9%= 681,775 681,775 x 4/ 12 681,775 x 8/ 12 7,575 ,28 2 x 1.09 = 8 ,25 7,057 8 ,25 7,057... 154,084 1 52, 788 151,443* Premium Amortization 30,696 32, 231 33,843 35,535 37,3 12 23,506 24 ,6 82 25,916 27 ,21 2 28 ,557 Bond Carrying Value 5,386,0 72 5,355,376 5, 323 ,145 5 ,28 9,3 02 5 ,25 3,767 5 ,21 6,455... 7,575 ,28 2 8 ,25 7,057 9,000,000 Chapter - Non-Current Liabilities (c) Interest expense for 20 12 ( 625 ,4 82 x 4/ 12) 20 8,494 Carrying value, September 1, 20 12 Amortization through December 31, 20 12 Carrying