On 1 April 2019 White Bhd issued 1 million 5% convertible loan stock at RM1 million. The loan stock is redeemable at RM1 million for cash on 31 March 2023, or are convertible into 1 million new ordinary shares at that date. The interest is paid on 31 March each year. An interest rate on similar loan stock without the conversion option is 7% pa. The expectation is that loan holders will choose the conversion option rather than redeeming the loan stock. Required: a) Calculate the equity and liability components of the 5% convertible loan stock on 1 April 2019. b) Prepare the journal entries to record the transaction on 1 April 2019. c) Show the extracts from the statements of financial performance and the statements of financial position for the year 31 March 2020. d) Assuming that all the loan stock holders choose to convert all their interests into ordinary shares on maturity, show the journal entries to record the transaction.

On 1 April 2019 White Bhd issued 1 million 5% convertible loan stock at RM1 million. The loan stock is redeemable at RM1 million for cash on 31 March 2023, or are convertible into 1 million new ordinary shares at that date. The interest is paid on 31 March each year. An interest rate on similar loan stock without the conversion option is 7% pa. The expectation is that loan holders will choose the conversion option rather than redeeming the loan stock. Required: a) Calculate the equity and liability components of the 5% convertible loan stock on 1 April 2019. b) Prepare the journal entries to record the transaction on 1 April 2019. c) Show the extracts from the statements of financial performance and the statements of financial position for the year 31 March 2020. d) Assuming that all the loan stock holders choose to convert all their interests into ordinary shares on maturity, show the journal entries to record the transaction.

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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Concept explainers

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:

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