XYZ Inc issued 445 convertible bonds - each at a price of 101.95% of the $1,000 face value. At issuance, similar bonds without the conversion option had a price of 96.01% of the $1,000 face value. The convertible bonds have just been converted. The carrying value of the bonds on the conversion date is $435,300, and the company has paid $12,460 to the bondholders to induce early conversion. Using the book value method and IFRS, how much will the company's common share balance increase with conversion?

XYZ Inc issued 445 convertible bonds - each at a price of 101.95% of the $1,000 face value. At issuance, similar bonds without the conversion option had a price of 96.01% of the $1,000 face value. The convertible bonds have just been converted. The carrying value of the bonds on the conversion date is $435,300, and the company has paid $12,460 to the bondholders to induce early conversion. Using the book value method and IFRS, how much will the company's common share balance increase with conversion?

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

Stinson Corporation issued $600,000 of 7%, 10-year bonds payable on March 31, 2022. The market interest rate at the date of issuance was 9%, and the bonds pay interest semiannualy. St Corporation's year-end is March 31. Read the requirements. 1. Using the PV function in Excel, The issue price of the bonds is Requirements 1. Using the PV function in Excel, calculate the issue price of the bonds 2. Prepare an effective-interest amortization table for the bonds through the first three interest payments. Round amounts to the nearest dollar 3. Record Stinson Corporation's issuance of the bonds on March 31, 2022, and payment of the first semiannual interest amount and amortization of the bond discount on September 30, 2022 Explanations are not required Print Done X Clear all Check answer
On January 1, 20X1, Toy inc. Issued $500,000 of convertible bonds. The bonds mature on December 31, 20X5, Interest is payable annually at 6.0% on December 31. The bonds are convertible at the investor's option at the rate of 20 common shares for each $1,000 bond. Similar bonds without the conversion option were selling for $475,000 at time of issuance. Transaction costs of $10,000 were incurred. Required Prepare the journal entry to record the issuance of the bonds.
Florence Inc. issued 8,000, 5-year convertible bonds of $2,000 each for $4,000,000 at the beginning of 2021. The bonds have a stated rate of interest of 9% and interest is payable annually. Each bond can be convertible into 100 shares with a par value of $10. The market rate of similar nonconvertible debt is 10%. Determine the fair value of the equity component using the “with-and-without” method is a. $3,848,288 b. $2,483,600 c. $1,365,688 d. $151,712
Barbie originally issued 5,000,000 face value bonds at 105 or a premium of 250,000. Subsequently, the entity reacquired 1, 000,000 face value bonds to be placed in the treasury at 103. At the time of the reacquisition, the unamortized premium balance is 200,000, and accrued interest on the treasury bonds is 30,000 which is paid in cash. How much should be the book value of the bonds after the reacquisition of the bonds as treasury?
On December 1, Y4, Boston Corp. issued $4,600,000 (par value), 12%, 5-year convertible bonds for $4,950,000. Interest is payable December 1 and June 1. If the bonds had not been convertible, they would have sold for $4,890,000. Bond premium/discount is amortized each interest period on a straight-line basis. Boston reports under IFRS. Boston’s fiscal year end is September 30. On June 1, Y6, 65% of these bonds were converted into 42,000 no par common shares. At that time shares were trading at $100 per share. Instructions a. Prepare the entry to record the issue of the bonds on December 1, Y4. b. Prepare the entry to record the conversion on June 1, Y6.
On July 1, 2023, Tien Limited called its 9% convertible bonds for conversion. The $10 million of par value bonds were converted into 1 million common shares. On July 1, there was $75,000 of unamortized discount applicable to the bonds, and the company paid an additional $65,000 to the bondholders to induce conversion of all the bonds. At the time of conversion, the balance in the account Contributed Surplus—Conversion Rights was $270,000, and the bond’s fair value (ignoring the conversion feature) was $9,955,000. The company records conversion using the book value method. Prepare the journal entries if Tien prepares its financial statements using IFRS and if it uses ASPE. Can someone please explain what the difference is between IFRS and ASPE and how they got the number in the journal entries, thanks! Please donot provide solution in image format provide solution in step by step format and fast solution
Marinara, Inc. issued a 3-year term 2,000 convertible bonds on January 1, 2021 at 110 with a face value of P1,000 per bond. Interest is payable on annual basis at a stated rate of 6%. The said bonds may be converted anytime into 100 shares with par value of P5. From the time of the issuance of the convertible bonds, the prevailing market rate for similar debt without any conversion feature is 9%. Present value factor of P1 lumpsum using 9% for 3 periods is .77 Present value factor of P1 ordinary annuity using 9% for 3 periods is 2.53 Required: What is the liability component of the issuance of the convertible bonds on January 1, 2021? What is the equity component of the issuance of the convertible bonds on January 1, 2021?
Rangel Corporation issued $520,000 of 5%, 15-year bonds payable on March 31, 2022. The market interest rate at the date of issuance was 8%, and the bonds pay interest semiannually. Rangel Corporation's year-end is March 31. Read the requirements. 1. Using the PV function in Excel, calculate the issue price of the bonds. (Round your answer to the nearest whole dollar.) The issue price of the bonds is
On January 1, 2009, Beta Company issued 5,000 of its 12%, P1,000 face value bonds for P5,600,000, including accrued interest. The bonds are dated October 1, 2008, mature on October 1, 2018, and pay interest annually on October 1. The bonds were issued through an underwriter to whom Beta paid bond issue cost of P150,000. On January 1, 2009, what should Beta report as bonds payable?
At the beginning of current year, Sandy Company issued 5,000 convertible bonds payable. The bonds have a 3 year term and are issued at 110 with a face amount of P1,000 per bond. Interest is payable annually in arrears at a nominal 6% interest rate. Each bond is convertible at anytime up to maturity into 100 ordinary shares with par value of P5. When the bonds are issued, the prevailing market interest rate for similar debt instrument without conversion option is 9%. The present value of 1 at 9% for 3 periods is .77 and the present value of an ordinary annuity of 1 at 9% for 3 periods is 2.53. What amount should be reported as equity component of the original issuance of the convertible bonds payable?
On May 1, 2011, Stone Corporation issued $4 million of 10-year, 6% convertible bonds at 101. The similar bonds without the conversion rights were sold at 97. Interest is to be paid semi-annually on April 30 and October 31. Stone Corporate uses the straight-line method to amortize bond discount. On July 1, 2017, $1 million of bonds were converted into common shares. Stone Corporation uses the residual method in accounting for the issuance of convertible bonds. December 31 is the end of accounting year (reporting date). Required: Prepare journal entries needed at May 1, 2011; December 31, 2012; April 30, 2014; July 1, 2017;
On July 1, 2023, Pharoah Ltd., which follows ASPE, issued 1,000 convertible, five-year, $1,000 bonds. Each bond is convertible into 20 common shares at the bondholder's option. On the date of issuance, the bond's conversion rights were valued at $51,000. On July 1, 2026, the bonds had a carrying value on Pharoah's books of $969,000, and the fair market value of the bonds without the convertible option was $973,000. (a) Assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2026. Prepare the journal entry to record the conversion. (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 0 for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Bonds Payable Common Shares Contributed Surplus - Conversion Rights Debit Credit