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

See similar textbooks

Similar questions

please step by step solution.
On December 31, 2024, when the market interest rate is 8%, McMann Realty issues $700,000 of 5.25%, 10-year bonds payable. The bonds pay interest semiannually. Determine the present value of the bonds at issuance. (Round all currency amounts to the nearest whole dollar) (Click the icon to view Present Value of $1 table.) (Click the icon to view Future Value of $1 table.) The present value of the bonds at issuance amounts to (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) EXE
On January 1, 2020, XYZ Co. issued a bond with a $400,000 par (face) value. The bond is a 5-year bond and will mature on December 31, 2025. The bond has a contract rate of interest of 5% and interest is paid semi-annually on June 30 and December 31 of each year. On January 1, 2020, the market rate of interest for bonds was 6%. The issue price of the bond was $382,942. The journal entry to record issuance of the bond would be: Debit Credit Cash $382,942 Discount on B/P 17,058 Bonds Payable $400,000 prepare the journal entry to record the first interest payment on XYZ Co.'s bond on June 30, 2020 using the straight-line method. (Show your work in each step using the recommended approach.)
On January 1,2020, ABC Company issued P 10,000,000 convertible bonds with a stated rate of 12% at 110. The principal of the bonds is payable on December 31, 2024. Interest on the bonds is payable annually starting December 31,2020. Each P 5,000 bond is convertible into 20 ordinary shares of P 50 par. Without the bond conversion privilege, the bonds would have sold to yield 10%.On December 31,2021 after paying periodic interests, half of the bonds issued were converted to ordinary shares. On October 1,2023, half of the remaining bonds were retired at 102 plus accrued interest. Without the bond conversion privilege, the bonds are quoted at 101.How much was credited to the share premium- ordinary account at the time of conversion of bonds on December 31,2021? (For present value factors, do not round off) P 1,000,000 P 4,369,606.52 P 4,639,606.52 P 5,248,685.20
On January 1,2020, ABC Company issued P 10,000,000 convertible bonds with a stated rate of 12% at 110. The principal of the bonds is payable on December 31, 2024. Interest on the bonds is payable annually starting December 31,2020. Each P 5,000 bond is convertible into 20 ordinary shares of P 50 par. Without the bond conversion privilege, the bonds would have sold to yield 10%.On December 31,2021 after paying periodic interests, half of the bonds issued were converted to ordinary shares. On October 1,2023, half of the remaining bonds were retired at 102 plus accrued interest. Without the bond conversion privilege, the bonds are quoted at 101.How much is the gain or loss on retirement of bonds on October 1,2023?
Curri, Incorporated sold its 5% bonds with a maturity value of $1,000,000 on August 1, 2021. Investors in the market purchased the bonds for $1,044,915 a price which would earn them a 4% yield on their investment. The difference between the stated and market rates was attributed to revised inflation expectations. The bonds mature on August 1, 2026 and pay interest semi-annually on August 1 and February 1. The bonds are callable at any time after August 1, 2023. Required: C) Assume that Curri was unable to make the required interest payment on February 1, 2023. (NOTE: This assumption should not change your responses to items A) and B) above). The bondholders agreed to accept $800,000 of 2% bonds from Curri in full satisfaction of all claims relating to the 5% bonds. The 2% bonds mature on August 1, 2027 and require interest to be paid quarterly. On February 2, 2023 the 2% bonds were trading in the bond market at 77. How should Curri report the February 1, 2023 swap of the 2% bonds for…
Auerbach Inc. issued 8% bonds on October 1, 2021. The bonds have a maturity date of September 30, 2031 and a face value of $300 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2022. The effective interest rate established by the market was 10%. How much cash interest does Auerbach pay on March 31, 2022? (Round your answer to 2 decimal places.) Top of Form Multiple Choice $24.00 million. $12.00 million. $30.00 million. $15.00 million.
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 1,2020, ABC Company issued P 10,000,000 convertible bonds with a stated rate of 12% at 110. The principal of the bonds is payable on December 31, 2024. Interest on the bonds is payable annually starting December 31,2020. Each P 5,000 bond is convertible into 20 ordinary shares of P 50 par. Without the bond conversion privilege, the bonds would have sold to yield 10%.On December 31,2021 after paying periodic interests, half of the bonds issued were converted to ordinary shares. On October 1,2023, half of the remaining bonds were retired at 102 plus accrued interest. Without the bond conversion privilege, the bonds are quoted at 101.How much was credited to the share premium- ordinary account at the time of conversion of bonds on December 31,2021?
The Werner Company issued 10-year bonds on January 1, 2020. The debt has a face value of $800,000 and an annual stated interest rate of 6%. Interest payments are due semiannually beginning June 30, 2020. The market interest rate on the bonds is 6%. a.What will this bond be priced at on January 1, 2020? b.More advanced: On January 1, 2023, the market rate of interest for these bonds is 8%. What will you be willing to pay for these bonds on that date?
On January 1, 2024, ABC Corp. issued 54 million of 10 year bonds at an 8%stated interest rate to be paid annually. ABC Corp. issued the bonds for S3, 501, 514 since the market rate of interest was 10% . What is the carryingvalue of the bond that ABC Corp. would report on its December 31, 2024balance sheet? (round to the nearest dollar) S3,531,665S3, 500,000S3,526,438S3,564,832S4,000,000
1. On January 1, 2020, CHAR Company issued P 10,000,000 convertible bonds with a stated rate of 12% at 110. The principal of the bonds is payable on December 31, 2024. Interest on the bonds is payable annually starting December 31, 2020. Each P 5,000 bond is convertible into 20 ordinary shares of P 50 par. Without the bond conversion privilege, the bonds would have sold to yield 10%. On December 31, 2021, after paying periodic interests, half of the bonds issued were converted to ordinary shares. On October 1, 2023, half of the remaining bonds were retired at 102 plus accrued interest. Without the bond conversion privilege, the bonds are quoted at 101. How much was credited to the share premium- ordinary account at the time of conversion of bonds on December 31, 2021? (For present value factors, do not round off) 2. On January 1, 2021, MAMA Company sold the property to the PAPA Company. There was no established exchange price for the property, and PAPA gave MAMA a P2,000,000…