Irbid Corporation issues 3,000 convertible bonds at January 1, 2018. The bonds have a three year life, and are issued at par with a face value of JOD1,000 per bond, giving total cash proceeds of JOD4,000,000. Interest is payable annually at 6 percent. Each bond is convertible into 250 ordinary shares (par value of JOD1). When the bonds are issued, the market rate of interest for similar debt without the conversion option is 8%. Required: Compute the liability and equity component of the convertible bondon January 1, 2018.

Irbid Corporation issues 3,000 convertible bonds at January 1, 2018. The bonds have a three year life, and are issued at par with a face value of JOD1,000 per bond, giving total cash proceeds of JOD4,000,000. Interest is payable annually at 6 percent. Each bond is convertible into 250 ordinary shares (par value of JOD1). When the bonds are issued, the market rate of interest for similar debt without the conversion option is 8%. Required: Compute the liability and equity component of the convertible bondon January 1, 2018.

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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