PT ABC issued at a premium of Rp5.000 a Rp100.000 bond issue convertible into 2.000 ordinary shares (par value Rp40). At the time of the conversion, the unamortized premium is Rp2.000, the market value of the bonds is Rp110.000, and the shares are quoted on the market at Rp60 per share. If the bonds are converted into ordinary shares, what is the amount of share premium to be recorded on the conversion of the bonds? * Rp22.000 Rp32.000 Rp40.000 Rp25.000

PT ABC issued at a premium of Rp5.000 a Rp100.000 bond issue convertible into 2.000 ordinary shares (par value Rp40). At the time of the conversion, the unamortized premium is Rp2.000, the market value of the bonds is Rp110.000, and the shares are quoted on the market at Rp60 per share. If the bonds are converted into ordinary shares, what is the amount of share premium to be recorded on the conversion of the bonds? * Rp22.000 Rp32.000 Rp40.000 Rp25.000

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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On January 1 , 2021, Gray Co. issued its 10%, 4-year convertible debt instrument with a face amount of P 4,000,000 for P 4,400,000. Interest is payable every Dec. 31 of year year. The debt instrument is convertible into 35,000 ordinary shares with a par value of P 100. When the debt instruments were issued, the prevailing market rate of interest for similar debt without conversion option is 8%. PV of 8% for an ordinary annuity of P 1 after 4 years 3.312 PV of 8 % after 4 interest periods. .735 How much of the total proceeds represent the equity component?
2. On January 1, 2020, ABC Corporation issued P5,000,000, 12%, convertible bonds. The privilege allows the holder the right to convert the liability instrument into 25 ordinary shares with P25 par value for every P1000 convertible bond, with minimum cash out of P2 per share. The quoted market price of the bonds including the conversion feature cannot be determined reliably on this date but the effective interest rate of these instruments with the privilege is 10%. It requires payment of interest every January 1 starting 2021 until its maturity on January 1, 2028. The quoted price of the bonds ex – privilege cannot be determined reliably as well, however; the market interest rate of the bonds ex-privilege is 13% at the date of issue. Determine the amount to be allocated to the equity component out of the proceeds of the entire issue. (Use 4-decimal PVF and round off final answer to whole number)
Richmond Co. sold convertible bonds at a premium. Interest is paid on May 31 and November 30. On May 31, after interest was paid, 100, $1,000 bonds are tendered for conversion into 3,000 shares of $10 par value ordinary shares that had a market price of $40 per share. How should Richmond Co. account for the conversion of the bonds into ordinary shares under the book value method? Discuss the rationale for this method.
Sandhill Co. has $3890000 of 7% convertible bonds outstanding. Each $1000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2025, the holders of $1167000 bonds exercised the conversion privilege. On that date, the market price of the bonds was 105 and the market price of the common stock was $37. The total unamortized bond premium at the date of conversion was $288000. Sandhill should record, as a result of this conversion, a O loss of $11670. O credit of $176700.00 to Paid-in Capital in Excess of Par. O credit of $203100 to Paid-in Capital in Excess of Par. O credit of $92160 to Premium on Bonds Payable.
The following information is relevant: 1. On 31 March 2010 Harcourt plc made a 1 for 5 rights issue at £2.35 per share. The market value of a share on that date was £3.25. 2. The 12% convertible bonds are convertible as follows: a. If the conversion is exercised on 1 January 2011 each £100 of bonds is convertible into 70 ordinary shares. b. If the conversion is exercised on 1 January 2012 each £100 of bonds is convertible into 60 ordinary shares. 3. Harcourt’s basic EPS for 2009 is 12p. Required: a) Calculate the basic and diluted EPS for Harcourt plc for 2010 and restate the basic EPS for 2009. b) Discuss why there is a need to disclose diluted earnings per share.
Neu Inc. issues $5 million face amount convertible bonds; the bonds issue at 101. Similar bonds issued without the conversion right would have been issued at 99. Neu applies IFRS. At time of issuance, Neu should recognize a bond-related liability in the amount of: $ 0. $4.95 million. $5 million. $5.05 million.
Blair Ltd. owns 100 bonds that can be converted into shares of Mac Ltd. with par value CU500 each bond. The historical cost is CU48,000 at the purchase date of 01/01/20x1. The bonds will mature at the date of 31/12/20x5. The nominal interest rate is 5% annually. The interest will be paid at the end of the period. Blair Ltd. must spend CU1,000 on a brokerage company to acquire this bond. Blair Ltd. intends to hold this investment until the maturity date and applies the accounting standards under IAS/IFRS. Required: (1) Recognize and measure the above bonds on 01/01/20x1 and 31/12/20x1. Assumed that, on December 31, 20x1, Blair Ltd. had no intention of converting bonds into ordinary shares. (2) Blair Ltd’s manager said that it is inappropriate to distinguish between hedging and trading activities for the purpose of reporting financial instruments in general purpose financial statements. Outline the arguments for and against this view.
8. A bond issued with a par value of $200,000 and a carrying amount of $195,500 is retired at 98.5. The gain or loss on this transaction is: discont = 4500 Bond Payabl 200000 A) $3,000 loss. B) $3,000 gain. C) $1,500 loss. D) $1,500 gain. discout Debit 4500 199901.5
Computalog Inc. showed the following on its December 31, 2023, balance sheet: Bonds payable, convertible $ 4,040,000 Less: Unamortized discount 14,544 $ 4,025,456 Required: 1. Assuming the bonds are convertible into 404,000 common shares, journalize the conversion on January 1, 2024, when the market value per common share was $10.25. 2. How will the conversion of bonds into common shares affect the elements of the balance sheet (assets, liabilities, equity)?
4. What is the equity equity component arising from the insurrance bonds payable on January 1, 2016? 5. What is the loss on the extingushed of the convertible bonds payable on December 31.2018
Bond ConversionE11B. Mendoza Corporation has $400,000 of 6 percent bonds outstanding. There is$20,000 of unamortized discount remaining on these bonds after the July 1, 2014,semiannual interest payment. The bonds are convertible at the rate of 20 shares of $5par value common stock for each $1,000 bond. On July 1, 2014, bondholders presented $300,000 of the bonds for conversion.1. Is there a gain or loss on conversion, and if so, how much is it?2. How many shares of common stock are issued in exchange for the bonds?3. In dollar amounts, how does this transaction affect the total liabilities and the totalstockholders’ equity of the company? In your answer, show the effects on fouraccounts.
E On January 1, 20x1, Kindness Co. issued 3-year, 10%, P2.000,000 convertible bonds for P2,200,000. Principal is due at maturity but interest is payable every year-end. The bonds are convertible into 6,000 ordinary shares with par value per share of P200. On issuance date, the prevailing market rate of interest for sinmilar debt without a conversion feature was 12%. On December 31, 20x2, Kindness Co. retired all the bonds for P2,000,000. On retirement date, the current rate for similar debt instrument without a conversion feature was 11%. Requirement: Provide all the entries in 20x1 and 20x2.