1. What is the carrying amount of the bonds payable on December 31,2020?A. 5,450,000B. 4,830,000C. 5,000,000D. 4,380,000E. None of the above 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 bondwas issued with 10 share warrants, each of which entitled the bondholder to purchase one share of P100 par valueat 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 prevailingmarket rate of interest for similar bonds without warrants is 12%.Note: Round-off present value factors to two (2) decimal places.

Bonds payable is one of the form of liability being incurred in business, on which regular interest…

Answered: 1. What is the carrying amount of the…

1. What is the carrying amount of the bonds payable on December 31,2020? A. 5,450,000 B. 4,830,000 C. 5,000,000 D. 4,380,000 E. None of the above

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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Question

1. What is the carrying amount of the bonds payable on December 31,2020? A. 5,450,000 B. 4,830,000 C. 5,000,000 D. 4,380,000 E. None of the above

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.

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