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.

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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