E16.2 (LO 1) (Issuance and Repurchase of Convertible Bonds) Assume the same information in E16.1, except that Angela AG converts its convertible bonds on January 1, 2023. Instructions a. Compute the carrying value of the bond payable on January 1, 2023. b. Prepare the journal entry to record the conversion on January 1, 2023. c. Assume that the bonds were repurchased on January 1, 2023, for €1,940,000 cash instead of being converted. The net present value of the liability component of the convertible bonds on January 1, 2023, is €1,900,000. Prepare the journal entry to record the repurchase on January 1, 2023.
E16.2 (LO 1) (Issuance and Repurchase of Convertible Bonds) Assume the same information in E16.1, except that Angela AG converts its convertible bonds on January 1, 2023. Instructions a. Compute the carrying value of the bond payable on January 1, 2023. b. Prepare the journal entry to record the conversion on January 1, 2023. c. Assume that the bonds were repurchased on January 1, 2023, for €1,940,000 cash instead of being converted. The net present value of the liability component of the convertible bonds on January 1, 2023, is €1,900,000. Prepare the journal entry to record the repurchase on January 1, 2023.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Please answer E16-2, and show all workings clearly.
Transcribed Image Text:E16.1 (LO 1) (Issuance and Repurchase of Convertible Bonds) Angela AG issues
2,000 convertible bonds at January 1, 2022. The bonds have a 3-year life and are issued at
par with a face value of €1,000 per bond, giving total proceeds of €2,000,000. Interest is
payable annually at 6%. Each bond is convertible into 250 ordinary shares (par value of C1).
When the bonds are issued, the market rate of interest for similar debt without the
conversion option is 8%.
Transcribed Image Text:E16.2 (LO 1) (Issuance and Repurchase of Convertible Bonds) Assume the same
information in E16.1, except that Angela AG converts its convertible bonds on January 1,
2023.
Instructions
a. Compute the carrying value of the bond payable on January 1, 2023.
b. Prepare the journal entry to record the conversion on January 1, 2023.
c. Assume that the bonds were repurchased on January 1, 2023, for €1,940,000 cash
instead of being converted. The net present value of the liability component of the
convertible bonds on January 1, 2023, is €1,900,000. Prepare the journal entry to
record the repurchase on January 1, 2023.
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