On January 1, 2021, MANGO Corp. issues $100 million of convertible bonds at par value. The bonds have a stated annual interest rate of 6%, pay interest semiannually, and come due December 31, 2025. The bonds are convertible at any time after issuance at the rate of 25 shares of common stock for each $1,000 of the face value of the convertible bonds. Issuance costs total $500,000. The current annual market interest rate for non-convertible bonds with similar maturity is 8%. Required: 1 - Prepare the journal entries to record the issuance of the convertible bonds (round to the nearest dollar). 2 - Determine the amount of expense related to the convertible bonds that the company should recognize each year ( round to the nearest dollar) and prepare the journal entries for the first year only.
On January 1, 2021, MANGO Corp. issues $100 million of convertible bonds at par value. The bonds have a stated annual interest rate of 6%, pay interest semiannually, and come due December 31, 2025. The bonds are convertible at any time after issuance at the rate of 25 shares of common stock for each $1,000 of the face value of the convertible bonds. Issuance costs total $500,000. The current annual market interest rate for non-convertible bonds with similar maturity is 8%. Required: 1 - Prepare the journal entries to record the issuance of the convertible bonds (round to the nearest dollar). 2 - Determine the amount of expense related to the convertible bonds that the company should recognize each year ( round to the nearest dollar) and prepare the journal entries for the first year only.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![On January 1, 2021, MANGO Corp. issues $100 million of convertible bonds at par value. The bonds have
a stated annual interest rate of 6%, pay interest semiannually, and come due December 31, 2025. The
bonds are convertible at any time after issuance at the rate of 25 shares of common stock for each $1,000
of the face value of the convertible bonds. Issuance costs total $500,000. The current annual market
interest rate for non-convertible bonds with similar maturity is 8%. Required: 1 - Prepare the journal
entries to record the issuance of the convertible bonds (round to the nearest dollar). 2 - Determine the
amount of expense related to the convertible bonds that the company should recognize each year (
round to the nearest dollar) and prepare the journal entries for the first year only.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1a1a469d-0d3d-4434-a380-e7eea9db0da1%2F07b4543b-15b8-48bf-a66f-169d509bc1bd%2F3k5eu0c_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2021, MANGO Corp. issues $100 million of convertible bonds at par value. The bonds have
a stated annual interest rate of 6%, pay interest semiannually, and come due December 31, 2025. The
bonds are convertible at any time after issuance at the rate of 25 shares of common stock for each $1,000
of the face value of the convertible bonds. Issuance costs total $500,000. The current annual market
interest rate for non-convertible bonds with similar maturity is 8%. Required: 1 - Prepare the journal
entries to record the issuance of the convertible bonds (round to the nearest dollar). 2 - Determine the
amount of expense related to the convertible bonds that the company should recognize each year (
round to the nearest dollar) and prepare the journal entries for the first year only.
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