On January 1, 2016, Saul Company issued convertible bonds with a face amount ofP 5,000,000 for P 6,000,000. The bonds are convertible into 50,000 shares with P 100par value. The bond have a 5-year life with 10% stated interest rate payable annuallyevery December 31.The fair value of the convertible bonds without conversion option is computed atP 5,399,300 on January 1, 2016.On Dec. 31, 2018, the convertible bonds were not converted but fully paid forP5,550,000.On such date, the fair value of the bonds without conversion privilege is P 5,400,000and the carrying amount is P 5,178,300.What is the premium on bonds payable on January 1, 2016?|

Bond premium The bond premium is the excess paid amount over the par or face value for the bond. It…

Answered: On January 1, 2016, Saul Company issued…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

The Stellar Corporation issued 10-year, $4,310,000 par, 7% callable convertible subordinated debentures on January 2, 2020. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 13:1, and in 2 years it will increase to 19:1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straight-line basis. Stellar’s effective tax was 20%. Net income in 2020 was $7,900,000, and the company had 2,120,000 shares outstanding during the entire year.Compute both basic and diluted earnings per share. Basic earnings per share $ Diluted earnings per share $
Flysafe Bhd issues 2,000 convertible bonds at 1 January 2019. The bonds have a 3 years term, and are issued at par with a face value of RM1,000 per bond, giving total proceeds of RM2,000,000. Interest is payable annually in arrears at a nominal annual interest rate of 6%. Each bond is convertible at any time up to maturity into 250 ordinary shares. When the bonds were issued, the prevailing market interest rate for similar debt without the conversion option is 9%. When preparing the draft financial statements for the year ended 31 December2020, the directors are proposing to show the convertible bonds within equity in the statement of financial position, as they believe all the bond holders will choose the equity option when the loan note is due for redemption. They further intend to charge a finance cost of RM120,000 (RM2,000,000 x 6%) in the statement of profit or loss for each year up to the date of redemption. Required Critically evaluate the impact of the directors’ proposed…
Mills Corp. (MC) prepares its statements in accordance with IFRS. On January 1, 2021, MC issued 1,000 seven-year, 5% convertible bonds with a face value of $1,000. Interest is paid annually on the bonds on December 31. Each $1,000 bond is convertible into 35 common shares, which are currently trading at $34 per share. Similar bonds without conversion features carry an interest rate of 7%. The bonds were issued at 94. Required: Calculate the amount to be allocated to the bond and the options, and record the journal entry at the date of issuance. Assume that after six years, when the carrying amount of the bonds is $981,308, the holders of the convertible bond decide to convert their bonds before the bond maturity date. Prepare the journal entry to record the conversion. How many shares were issued at the conversion?
On January 1, 2022, Aaron Incorporated issued $1,530,000 par value, 6%, 7-year bonds (i.e., there were 1,530 of $1,000 par value bonds in the issue). Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1. The issue price of the bonds based on a 12% market rate of interest is $1,103,360. Prepare the amortization table for the first 2 years, assuming Aaron uses the straight-line method. (Round each calculation to the nearest whole number and then use the rounded value for each subsequent calculation in the table.) Date January 1, 2022 July 1, 2022 January 1, 2023 July 1, 2023 January 1, 2024 Cash Interest Straight-Line Interest Discount/Premium Amortization Carrying Value
Sheridan Corporation issued $5 million of 10-year, 6% callable convertible subordinated debentures on January 2, 2023. The debentures have a face value of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in two years it will increase to 17:1. At the date of issue, the bonds were sold at 100 to yield a 6% effective interest rate. The bond discount is amortized using the effective interest method. Sheridan's effective tax rate was 30%. Net income in 2023 was $7.4 million, and the company had 3 million shares outstanding during the entire year. For simplicity, ignore the requirement to record the debentures' debt and equity components separately. (a) Calculate basic earnings per share. (Round answers to 2 decimal places, e.g. 15.25.) Basic earnings per share $
(Entries for Conversion, Amortization, and Interest of Bonds) Volker Inc. issued $2,500,000 of convertible 10-year bonds on July 1, 2017. The bonds provide for 12% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $54,000, which is being amortized monthly on a straight-line basis.The bonds are convertible after one year into 8 shares of Volker Inc.’s $100 par value common stock for each $1,000 of bonds.On August 1, 2018, $250,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash.InstructionsPrepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates. (Round to the nearest dollar.)(a) August 1, 2018. (Assume the book value method is used.)(b) August 31, 2018.(c) December 31, 2018, including closing entries for…
On April 1, 2024, Déjà Vu Company issued 12% bonds that have a total face value of $140,000 (each bond has a face value of $1,000). The bonds sold for $164,023 and mature in 20 years. The effective interest rate for the bonds was 10% on 4/1/24. Interest is paid semiannually on September 30 and March 31. The market value of the bonds was 102 on 12/31/24 and $104 on 12/31/25. The market rate of interest on the bonds fell to 9% on 8/1/24. David Company purchased all of the bonds as an investment on 4/1/2024. A partial amortization schedule appears below. 9/30/2024 8,400 3/31/2025 8,400 9/30/2025 8,400 3/31/2026 8,400 9/30/2026 8,400 3/31/2027 8,400 9/30/2027 8,400 Cash Interest $__ Interest Income 8,201 8,191 8,181 8,170 8,158 8,146 8,134 $_ Premium Amortized 199 209 219 230 242 254 266 What is the amount of assets related to the bonds on David's balance sheet: As of 12/31/24 if the bonds are accounted for as held-to-maturity. Carrying Value 164,023 163,824 163,615 $_ As of 12/31/2024 if…
On June 30, 2024, Blair Industries had outstanding $94 million of 7% convertible bonds that mature on June 30, 2025. Interest is payable each year on June 30 and December 31. The bonds are convertible into 8 million shares of $10 par common stock. On June 30, 2024, the unamortized balance in the discount on bonds payable account was $4 million. On June 30, 2024, half the bonds were converted when Blair's common stock had a market price of $38 per share. When recording the conversion, Blair should credit paid-in capital-excess of par: Multiple Choice $7 million. $9 million. $5 million. $3 million.
On January 1, 2022, P Corp. issued eight-year, 3% bonds with a face value of $400,000, with interest payable semi- annually on June 30 and December 31. The bonds were sold to yield 4%. Table values are: Present value of 1 for 8 periods at 3% .789 Present value of 1 for 8 periods at 4% 731 Present value of 1 for 16 periods at 1.5% 788 Present value of 1 for 16 periods at 2% .728 Present value of annuity for 8 periods at 3% Present value of annuity for 8 periods at 2% 7.020 7.325 Present value of annuity for 16 periods at 1.5% 14.131 Present value of annuity for 16 periods at 2% 13.578 What is the issue price of the bond?
On January 1, 2017, Ellison Co. issued eight-year bonds with a fase value of S6,000,000 and a stated interest rate of6%, payable semlannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: Present value of 1 for 8 periods at 6% Present value of 1 for 8 periods at 8% Use the following to answer question 12: .627 .540 Present value of 1 for 16 periods at 3% Present value of 1 for 16 periods at 4% Present value of annuity for 8 periods at 6% Present value of annuity for 8 periods at 8% Present value of annuity for 16 periods at 3% Present value of annuity for 16 periods at 4% .623 .534 6.210 5.747 12.561 11.652 honds issued 12. The present value of the interest is A) $2,068,920. B) $2,097,360. C) $2,235,600. D) $2,260,980.
Mae Jong Corporation issues 1,000 convertible bonds at the beginning of 2021. The bonds have a four-year term with a stated rate of interest of 6 percent, and are issued at par with a face value of P1,000 per bond (total proceeds received from issuance of the bonds are P1,000,000). Interest is payable annually at December 31. Each bond is convertible into 250 ordinary shares with a par value of P1. The market rate of interest on similar non-convertible debt is 9 percent. Compute the liability component of Mae Jong’s convertible debt. PV of 1 for 4 periods PV of Ordinary Annuity for 4 periods 6% 0.79209 3.46611 9% 0.70843 3.23972 The issuance of convertible bonds increased the entity’s equity by:
Sarasota Inc. Issued $4,200,000 of convertible 5-year bonds on July 1, 2025. The bonds provide for 6% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $102,000, which is being amortized monthly on a straight-line basis. The bonds are convertible after one year into 15 shares of Sarasota Inc.'s $1 par value common stock for each $1,000 of bonds. On October 1, 2026, $504,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash. Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit…

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS