Smith Ltd issues 100,000 $1 redeemable convertible notes. The notes pay interest at 5% per annum. Each note converts at any time at the option of the holder into one ordinary share. The notes are redeemable at the option of the issuer for cash after 5 years. If after 5 years the notes have not been redeemed or converted, they cease to carry interest. Market rates for similar notes without the conversion option are 7% per annum. Required: In accordance with AASB 132 Financial Instruments: Presentation: (a) Calculate the amount of financial liability if Smith Ltd needs to record any financial liability. Give reasons to support your answer. Enter your answer here (b) Calculate the amount of equity instrument if Smith Ltd needs to record any equity instrument. Give reasons to support your answer.

Smith Ltd issues 100,000 $1 redeemable convertible notes. The notes pay interest at 5% per annum. Each note converts at any time at the option of the holder into one ordinary share. The notes are redeemable at the option of the issuer for cash after 5 years. If after 5 years the notes have not been redeemed or converted, they cease to carry interest. Market rates for similar notes without the conversion option are 7% per annum. Required: In accordance with AASB 132 Financial Instruments: Presentation: (a) Calculate the amount of financial liability if Smith Ltd needs to record any financial liability. Give reasons to support your answer. Enter your answer here (b) Calculate the amount of equity instrument if Smith Ltd needs to record any equity instrument. Give reasons to support your answer.

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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