At the beginning of the current year, Cove Company, a closely-held entity, issued 6% bonds with amaturity value of P6,000,000, together with 10,000 ordinary shares of P50 par value, for a combined caramount of P11,000,000.If issued separately, the bonds would have sold for P4,000,000 an 8% yield to maturity basis.1. What amount of the proceeds should be allocated to the ordinary shares? Please show solution

Solution Concept In case of the compound financial instrument Compound financial instrument is the…

Answered: At the beginning of the current year,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Iowa Corporation Issued $4,000,000 par value, 5% convertible bonds, at 101 for cash. If the bonds had not included the conversion feature, they would have sold for 99. Prepare the journal entry to record the issuance of the bonds for Iowa Corporation.
On January 1, 2024, Gless Textiles issued $12 million of 9%, 10-year convertible bonds at 101. • The bonds pay interest on June 30 and December 31. • Each $1,000 bond is convertible into 40 shares of Gless's no par common stock. • Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 10% of the issue as an investment. Required: 1. Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century. 2. Prepare the journal entries for the June 30, 2028, interest payment by both Gless and Century assuming both use the straight- line method. 3. On July 1, 2029, when Gless's common stock had a market price of $33 per share, Century converted the bonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (book value method). Complete this question by entering your answers in the tabs below.…
25) Harrell's Barrels issued $100 million of 6% convertible bonds at 101. Each $1,000 bond is convertible into 45 shares of Harrell's no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 98. Harrell applies International Financial Reporting Standards. Recording the issuance of the bonds would cause an increase in Harrell's: A) shareholders' equity of $1,000,000. B) shareholders' equity of $3,000,000. C) assets of $98,000,000. D) liabilities of $101,000,000.
On January 1, 2024, Gless Textiles issued $13 million of 10%, 10-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Gless's no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 15% of the issue as an investment. Required: Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century. Prepare the journal entries for the June 30, 2028, interest payment by both Gless and Century assuming both use the straight-line method. On July 1, 2029, when Gless's common stock had a market price of $33 per share, Century converted the bonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (book value method).
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Oriole Corporation issued $6600000 of 9%, ten-year convertible bonds on July 1, 2024 at 96.1 plus accrued interest. The bonds were dated April 1, 2024 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2025, $1320000 of these bonds were converted into 600 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion. If Interest Payable was credited when the bonds were issued, what amount should be debited to Interest Expense on October 1, 2024? O $155100 O $297000 O $141900 O $148500
(Issuance and Conversion of Bonds) For each of the unrelated transactions described below,present the entry(ies) required to record each transaction.1. Ehrlich Corp. issued $50,000,000 par value 8% convertible bonds at 102. If the bonds had not been convertible, thecompany’s investment banker estimates they would have been sold at par.2. On October 31, 2021, Ehrlich Corp. called its 10% convertible debenture bonds for conversion. The $60,000,000 parvalue bonds were converted into 600,000 shares of $1 par value common stock. On October 31, there was $155,000of unamortized premium applicable to the bonds, and the company paid an additional $355,000 to the bondholders toinduce conversion of all the bonds. The company records the conversion using the book value method. 3. Ehrlich Corporation issued 2,000 shares of $10 par value common stock upon conversion of 1,000 shares of $50 par value preferred stock. The preferred stock was originally issued at $60 per share. The common stock is…
On January 1, 2020, Blossom Ltd. issued 820 5-year, 11% convertible bonds at par of $1,000, with interest payable each December 31. Each bond is convertible into 100 common shares, and the current fair value of each common share is $6. Similar straight bonds carry an interest rate of 13%. Calculate the PV of the debt component by itself. Calculate using any of the following methods: (1) factor tables, (2) a financial calculator, or (3) Excel function PV. QUESTION: 1) PV of the debt component 2) How should Blossom record the issuance if it follows IFRS? Use the amount you arrived at in part (a) using a financial calculator or Excel. Date Account Titles and Explanation January 1 enter an account title enter an account title January 1 enter an account title Date Account Titles and Explanation enter an account title Debit 3) How should Blossom record the issuance if it follows ASPE? enter an account title enter a debit amount enter a credit amount Credit enter a debit amount enter a credit…

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