Question

LF (DIY) DRILL 4. On December 31, 2016, Camiguin Company shows the following data with respect to its matured obligation. Note payable P6,000,000 1,500,000 Accrued interest payable The company is threatened with a court suit if it could not pay its maturing debt. Accordingly, the company enters into an agreement with the creditor for the issuance of ordinary shares in full settlement of the note payable. The agreement provides for the issue of 50,000 ordinary shares with par value of P100. The ordinary share is currently quoted at P150 per share. How much is the share premium arising from the debt restructuring considered as "equity swap"? P1,000,000 P2,500,000 P1,500,000

Answer 1

Share premium is the differential amount of face value and issue value charged from the buyer of equity shares.

In the given case face value is P100 and issue value is P150 so share premium is P50 per share (150-100).

Share issued = 50000 shares

total premium = 50000*P50 = P250000