On December 31,2020, Tamia Company showed the following balances: Bonds payable-6% 4,000,000 Discount on bonds payable 500,000 Share premium-issuance 5,000,000 Share premium-conversion privilege 700,000 The interest is payable annually every December 31. The convertible bonds are not converted but fully paid on December 31,2020. On such date, the quoted price of the convertible bonds with conversion option is 105 which is the payment to the bondholders plus interest. However, the quotes price of the bonds without the conversion privilege is 95. 1. What is the carrying amount of the bonds payable on December 31,2020? A. 4,000,000 B. 4,500,000 C. 3,500,000 D. 4,200,000
Problem 7-18
On December 31,2020, Tamia Company showed the following balances:
Bonds payable-6% 4,000,000
Discount on bonds payable 500,000
Share premium-issuance 5,000,000
Share premium-conversion privilege 700,000
The interest is payable annually every December 31. The convertible bonds are not converted but fully paid on December 31,2020.
On such date, the quoted price of the convertible bonds with conversion option is 105 which is the payment to the bondholders plus interest.
However, the quotes price of the bonds without the conversion privilege is 95.
1. What is the carrying amount of the bonds payable on December 31,2020?
A. 4,000,000
B. 4,500,000
C. 3,500,000
D. 4,200,000
2. What is the gain or loss from extinguishment of bonds?
A. 700,000 gain
B. 700,000 loss
C. 300,000 gain
D. 300,000 loss
3. What is the total payment to the bondholders on December 31,2020?
A. 4,200,000
B. 4,440,000
C. 4,240,000
D. 4,040,000
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