Partial preview of the text
Download INTERMEDIATE ACCOUNTING 1 and more Study notes Accounting in PDF only on Docsity!
Chapter 5 - Financial Liabilities ds with Non-Detachable Share Warrants Issued When. an efitity issn ; the bondholders the i bonds with share warrants attached, it gry shares (common gs Tight to acquire-a specified ber_of t acqu pecified num! riod ace given price within a specified time we . ; i Te contl ieee, the residual approach to allocate the issue price oe equity (the warr arrants attached between the debt (the bond) d the € re ant). The residual approach uses the concept i ae Sead the residual interest in the assets of the corporat i A pinay shall deduct the separately determined fair jue of the ce’ om the issue price. The residue is the amount sssigned to the equity component. gw stration of Bonds with Attached Warrants On December 31, 2022,/ABC Corporation issued 1,000 of its Ge) 10-year, P1,000 face value bonds with non-detachable share yarrants._at 103. Each bond carried ‘two warrants, each warrant entitling the holder for one share of ABC’s P20 par value ordinary share al ied option price of P25 hare. Immediately after issuance, the bond without warrant Sells at/97 and each ordinary share sells at P75. Total issue price (P1,000,000 x 103%) P1,030,000 Market price of bonds without warrants 97% x P1,000,000 ___970,000 B—60,000)" Price assigned to warrants The entry for the issuance of the bonds with non-detachable ot share warrants is Cash 1,030,000 x Discount on Bonds Payable 30,000 { }m- 270K ) Bonds Payable 1,000,000 60,000 Share Warrants Outstanding unt on bonds payable is the excess of the face value of The disco’ 000,000 over the market price without the warrants, the bonds of P1,' P970,000. ABC shall report the account Share Warrants Outstanding as part of additional paid,in capital in the equity section of the statement of financial position. ~ = 321 ta 
