In 2021, a company issued 6% bonds with a maturity value of P40,000, together with 1,000 shares of its P10 par value ordinary share, for a combined cash amount of P150,000. The market value of the company's share on that date cannot be ascertained. If the bonds were issued separately, they would have been sold for P35,000 on an 8% yield to maturity basis. Determine the increase in share premium as a result of this transaction.

In 2021, a company issued 6% bonds with a maturity value of P40,000, together with 1,000 shares of its P10 par value ordinary share, for a combined cash amount of P150,000. The market value of the company's share on that date cannot be ascertained. If the bonds were issued separately, they would have been sold for P35,000 on an 8% yield to maturity basis. Determine the increase in share premium as a result of this transaction.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On January 1, 2020, Swifty Company sold 12% bonds having a maturity value of $450.000 for $484,117. which provides the bondholders with a 10% yield. The bonds are dated January 1,2020, and mature January 1.2025, with interest payable December 31 of each year. Swifty Company allocates interest and unamortized discount or premium on the effective-interest basis, (a) Your answer is correct. Prepare the journal entry at the date of the bond issuance. (Round answer to O decimal places, eg 38,548. If no entry is required, select "No Entry for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually) Date Account Titles and Explanation Debit Credit January 1. 2020 Cash 484117 Bonds Payable 450000 Premium on Bonds Payable 34117 Attempts. 2 of3 used (b) Prepare a schedule of interest expense and bond amortization for 2020-2022. Round answer to O decimal places, e 3854) Schedule of Interest Expense and Bond…
Myriad Solutions, Incorporated issued 10% bonds, dated January 1, with a face amount of $320 million on January 1, 2024, for $283,294,720. ● ● The bonds mature on December 31, 2033 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest is paid semiannually on June 30 and December 31. Required: 1. What would be the net amount of the liability Myriad would report in its balance sheet at December 31, 2024? 2. What would be the amount related to the bonds that Myriad would report in its income statement for the year ended December 31, 2024? 3. What would be the amount(s) related to the bonds that Myriad would report in its statement of cash flows for the year ended December 31, 2024? Note: Round your answers to the nearest whole dollar. 1. Net liability reported 2. Interest Expense 3. Amount reported in Statement of Cash flows
On November 16, 2020, Bilbond issued its 10-year, 7% P1,000,000 convertible bonds at 122. The bonds would have sold for P1,154,435 without the conversion feature. The effective interest rate of similar bonds without the conversion feature is 5%. What is the increase in equity on the date of issuance?
On January 1, 2021, Mania Enterprises issued 16% bonds dated January 1, 2021, with a face amount of $30 million. The bonds mature in 2033 (10 years). For bonds of similar risk and maturity, the market yield is 15%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:Determine the price of the bonds at January 1, 2021. (Enter your answer in whole dollars.)
Curri, Incorporated sold its 5% bonds with a maturity value of $1,000,000 on August 1, 2021. Investors in the market purchased the bonds for $1,044,915 a price which would earn them a 4% yield on their investment. The difference between the stated and market rates was attributed to revised inflation expectations. The bonds mature on August 1, 2026 and pay interest semi-annually on August 1 and February 1. The bonds are callable at any time after August 1, 2023. Required: C) Assume that Curri was unable to make the required interest payment on February 1, 2023. (NOTE: This assumption should not change your responses to items A) and B) above). The bondholders agreed to accept $800,000 of 2% bonds from Curri in full satisfaction of all claims relating to the 5% bonds. The 2% bonds mature on August 1, 2027 and require interest to be paid quarterly. On February 2, 2023 the 2% bonds were trading in the bond market at 77. How should Curri report the February 1, 2023 swap of the 2% bonds for…
On January 1, 2023, Teal Corporation purchased a newly issued $1,425,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Teal's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Click here to view Table A.2 - PRESENT VALUE OF 1- (PRESENT VALUE OF A SINGLE SUM) Click here to view Table A.4 - PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) X Your answer is incorrect. Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, e.g. 52.75.) PV $ -1062917.95 4
In 2019, Crane Ltd. issued $48,000 of 9% bonds at par, with each $1,000 bond being convertible into 100 common shares. The company had revenues of $77,300 and expenses of $40,200 for 2020, not including interest and taxes (assume a tax rate of 20%). Throughout 2020, 1,400 common shares were outstanding, and none of the bonds were converted or redeemed. (For simplicity, assume that the convertible bonds’ equity element is not recorded.) Calculate diluted earnings per share for the year ended December 31, 2020. (Round answer to 2 decimal places, e.g. 15.25.) Diluted earnings per share
The Bradford Company issued 12% bonds, dated January 1, with a face amount of $87 million on January 1, 2021. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity, the market yield is 14%. Interest is paid semiannually on June 30 and December 31. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Required: 1. Determine the price of the bonds at January 1, 2021 2. to 4. Prepare the journal entries to record their issuance by The Bradford Company on January 1, 2021, interest on June 30, 2021 and interest on December 31, 2021 (at the effective rate) Complete this question by entering your answers in the tabs below. Req 1 Prepare the journal entries to record their issuance by The Bradford Company on January 1, 2021, interest on June 30, 2021 and interest on December 31, 2021 (at the effective rate), (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required in the first…
AI Tool and Dye issued 8% bonds with a face amount of $160 million on January 1, 2021. The bonds sold for $150 million. For bonds of similar risk and maturity the market yield was 9%. Upon issuance, AI elected the option to report these bonds at their fair value. On June 30, 2021, the fair value of the bonds was $145 million as determined by their market value on the NASDAQ. Will AI report a gain or will it report a loss when adjusting the bonds to fair value? If the change in fair value is attributable to a change in the interest rate, did the rate increase or decrease? Will the gain or loss be reported in net income or as OCI?
On August 1, 2024, Perez Communications issued $36 million of 12% nonconvertible bonds at 105. The bonds are due on July 31, 2044. Each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase, for $50, one share of Perez Communications’ no par common stock. Interstate Containers purchased 20% of the bond issue. On August 1, 2024, the market value of the common stock was $48 per share and the market value of each warrant was $8. In February 2035, when Perez common stock had a market price of $62 per share and the unamortized discount balance was $2 million, Interstate Containers exercised the warrants it held. Questions: Prepare the journal entries on August 1, 2024, to record (a) the issuance of the bonds by Perez and (b) the investment by Interstate. Prepare the journal entries for both Perez and Interstate in February 2035, to record the exercise of the warrants.
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…
On January 1, 2025, Culver Company sold 12% bonds having a maturity value of $350,000.00 for $376,535.48, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2025, and mature January 1, 2030, with interest payable December 31 of each year. Culver Company allocates interest and unamortized discount or premium on the effective-interest basis. Click here to view factor tables. (a) Your answer is partially correct. Prepare the journal entry at the date of the bond issuance. (Round answer to 2 decimal places, e.g. 38,548.25. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Date January 1, 2025 Account Titles and Explanation Cash Premium on Bonds Payable Interest Expense Debit 350000 26535.48 Credit 376535.48