On May 1, 2022, Marly Co. issued €500,000 of 7% bonds at 103, which are due on April 30, 2032. Twenty detachable stock warrants entitling the holder to purchase for €40 one share of Marly’s ordinary shares €15 par value, were attached to each €1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2022, the fair value of Marly’s shares was €35 per share and of the warrants was €2. On May1, 2022, Marly should record bonds payable at ....

On May 1, 2022, Marly Co. issued €500,000 of 7% bonds at 103, which are due on April 30, 2032. Twenty detachable stock warrants entitling the holder to purchase for €40 one share of Marly’s ordinary shares €15 par value, were attached to each €1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2022, the fair value of Marly’s shares was €35 per share and of the warrants was €2. On May1, 2022, Marly should record bonds payable at ....

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 7MCQ

See similar textbooks

Similar questions

On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.
On May 1, 2025, Sunland Co. issued $1590000 of 8% bonds at 102. The bonds are due on April 30, 2031. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Sunland's common stock, $15 par value, were attached to each $1000 bond. The bonds without the warrants would sell at 96. On May 1, 2025, the fair value of Sunland's common stock was $35 per share and of the warrants was $2. On May 1, 2025, Sunland should credit Paid-in Capital from Stock Warrants for O $60672. O $63600. O $64872. O $95400.
On July 1, 2022, Mocha Corporation issued P5M of its 10%, 7-year bonds with one detachable share warrant attached to each P1,000 bond. Each warrant provides for the right to purchase 20 shares of P15 par value ordinary for P20 each. The market value of the ordinary share was P 25 each at July 1, 2022. At that time, the bonds without the warrants are selling at 97. The compound financial instrument was sold at 104. What is the bonds issue price allocated to the share warrants outstanding? a.) P350,000 b.) P200,000 c.) P150,000 d.) P0
On January 1, 2021, Paraguay Company purchased P3,000,000 face amount, 9% bonds. The bonds were purchased to yield 8% interest. The bonds mature on January 1, 2026, and pay interest annually on December 31. The entity used 2 decimal places for the PVF. The fair value of the bonds on December 31, 2021, is P3,150,000. The fair value of the bonds on December 31, 2022, is P3,267,500. If measured at FVOCI, how much is the Unrealized gain on change in fair value-OCI, December 31, 2022 (round-off answer to the nearest peso value)?
On January 1, 2020, Apple Co. purchased held-for-collection and sales bonds par value $2,000,000, 9% paying $1,920,000. The bonds mature on January 1, 2025, and pay interest on July 1 and January 1. Apple Co. sells these bonds on January 1, 2023, for €2,025,000, after the interest has been received. If the carrying value of the bonds at the selling date was €1,966,500. Apple Co. uses effective interest amortization (100% effective interest rate). The gain on the sale is: A. €80,000. B. €25,000. C. €58,500. D. €33,500.
On July 1, 2022, RED TV Company purchased 1,000 of the P1000 face value, 8% bonds for P910,000 plus accrued interest to yield 10%. The bonds mature on January 1, 2029, pay interest annually on January 1, and are classified as trading securities. On February 13,2023, RED TV Company sold all the bonds at 92 which was also the closing quoted price of the bonds on the immediately preceding year. At what amount did RED TV present these bonds in its Statement of Financial Position on December 31, 2022 a.P0 b.P920,000 c.P915,500 d.P921,000
MHB Ltd. sold $6,740,000 of 12% bonds, which were dated March 1, 2023, on June 1, 2023. The bonds paid interest on September 1 and March 1 of each year. The bonds' maturity date was March 1, 2033, and the bonds were issued to yield 14%. MHB's fiscal year-end was February 28, and the company followed IFRS. On June 1, 2024, MHB bought back $2,740,000 worth of bonds for $2,640,000 plus accrued interest. (a) Your answer is partially correct. Using 1. a financial calculator, or 2. Excel function PV, calculate the issue price of the bonds and prepare the entry for the issuance of the bonds. Hint: Use the account Interest Expense in your entry). (Round answer to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Cash Interest Expense Bonds…
On January 1, 2021, Peru Company purchased P5,000,000 face amount, 17% bonds. The bonds were purchased to yield 16% interest. The bonds mature on January 1, 2026, and pay interest annually on December 31. The entity used 2 decimal places for the PVF. The fair value of the bonds on December 31, 2021, is P5,250,000. The fair value of the bonds on December 31, 2022, is P5,276,500. If measured at FVPL, how much is the interest income on December 31, 2021?
On December 31, 2021, PISTACHIO Company had outstanding ₱20 million face value convertible bonds maturing on December 31, 2024. Interest is payable annually on December 31. Each ₱1,000 bond is convertible into 60 shares of PISTACHIO’s ₱P10 par ordinary shares. The unamortized premium balance on December 31, 2021 is ₱350,000. The balance of Share premium arising from bond conversion privilege is ₱640,000. On this date, assume that on December 31, 2021, PISTACHIO retired the ₱2,000,000 issue at 103. Without the conversion privilege, these bonds would have been sold at 102. A. What is the amount credited to share premium upon conversion of the bonds? B. How much is the gain or loss on retirement taken to profit or loss?
On December 31, 2021, PISTACHIO Company had outstanding ₱20 million face value convertible bonds maturing on December 31, 2024. Interest is payable annually on December 31. Each ₱1,000 bond is convertible into 60 shares of PISTACHIO’s ₱P10 par ordinary shares. The unamortized premium balance on December 31, 2021 is ₱350,000. The balance of Share premium arising from bond conversion privilege is ₱640,000. On this date, an individual holding 2,000 of the bonds exercised the conversion privilege when the market value of PISTACHIO’s ordinary share was ₱18. What is the amount credited to share premium upon conversion of the bonds? *
On May 1, 2018, Luzon Company issued P2,000,000, 5 year, 10% bonds for P2,300,000. Each P1,000 bonds had two detachable warrants eligible for the purchase of one share of Luzon’s P100 par ordinary share for P120. Without the warrants the bonds are selling at P2,078,000. What amount should Luzon Company recognize as value of the share warrants?
On September 1, 2022, when the prevailing market rate on similar instruments was at 5%, ABC Corporation acquired P5,000,000 bonds from R Company. The bonds will be accounted as a financial asset at fair value through other comprehensive income. The bonds pay interest of 6% every March 1 and September 1 and will mature on September 1, 2027. The fair value of the bonds ( dirty price) at year end are presented below: Dec 31, 2022 107 Dec. 31,2023 105 Dec 31, 2024 103 Dec 31, 2025 104 Dec 31, 2026 101 a. what is the amount of adjustment to the unrealized gain or loss-other comprehensive income account to update the fair value of the investment on December 31, 2023? ( debit or credit?) b. prepare the journal entry to record the receipt of interest on march 1, 2024 c. what is the carrying value of the investment in bonds on december 31, 2024? d. If bonds with face value of P2,000,000 were sold at fair value on Decembe 31, 2025, ( after updating the…