The major difference between a convertible debt and share warrants is that upon exercise of the warrants a. No share premium can be part of the transaction. b. The shares involved are restricted and can only be sold by the recipient after a set period of time c. The holder has to pay

The major difference between a convertible debt and share warrants is that upon exercise of the warrants a. No share premium can be part of the transaction. b. The shares involved are restricted and can only be sold by the recipient after a set period of time c. The holder has to pay

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 assist by providing the correct answer for 1.1,1.2 and 1.3 1.1 There are limitations on the issuing and redemption of redeemable shares. Which ONE of the following is NOT an actual limitation? Select one: a. Redeemable shares cannot be issued if the only shares that the company has issued are redeemable shares. b. Redeemable shares can only be redeemed if they are fully paid-up. c. When redeeming shares, the company must pay fully for them at the time of redemption, unless the terms of redemption provide for a later date. d. Private companies can only issue redeemable shares if authorised by their articles. 1.2 Identify the statement that is correct regarding the paid up capital. Select one: a. If any of the shareholders has not paid amount on calls, such an amount may be called as ‘calls in arrears’. Therefore, paid up capital is equal to the called-up capital plus call in arrears. b. It is that portion of the called up capital which has been actually received from the…
6. What is the accounting for issued convertible bond?. a. The instrument should be recorded solely as bond. b. The instrument should be recorded as either.bond or equity but not both. The instrument should be recorded solely as equity. d. The instrument should be recorded as part bond and part equity. 7. Issued convertible bonds are ponente d Separated into liability and equity components with the liability component recorded at fair value and the residual assigned to the equity component b. Always recorded using the fair value option c. Recorded at face amount for the liability d. Recorded at the par value of shares 07 8. The carrying amount of bonds converted was greater than the par value of the ordinary shares issued. Which correctly states an effect of the conversion? a. Shareholders' equity increased b. Share premium decreased C. Retained earnings increased d. A loss is recognized 9. The conversion of bonds payable into ordinary shares is commonly recorded by a wond a.…
Mecca Energy Corp. issued a convertible bond on 1 August 20X9. The 10-year, 5% $16,000,000 bond pays interest semi-annually each 31 July and 31 January. At maturity, each $1,000 bond is convertible into 120 common shares. The bond was issued for $16,640,000. Market interest rates were approximately 6%. PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1. Provide the journal entry to record the initial issuance of the bond. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your time value to 5 decimal places and your final answers to the nearest whole dollar.) View transaction list Journal entry worksheet 1 Record the entry for issuance of bonds. Note: Enter debits before credits. Transaction 1 General Journal Debit Credit
Which of the following securities has a component of liquidity risk premium? Long-term government bonds only since all entities that issued long-term securities may be default in payment. All types of government or corporate security because these constituted to be a liability in the part of the issuer. Long-term corporate security because corporations may find it hard to convert assets to cash for payment. All government bond because this type of security is presumed to be always liquid.
Please i need all questions to be answered.
Puttable bonds are the bonds which are redeemed only on the liquidation of the company. T/F?
Western Die-Casting Company holds an investment in unsecured bonds of LGB Heating Equipment, Inc. When the investment was acquired, management’s intention was to hold the bonds for resale. Now management has the positive intent and ability to hold the bonds to maturity. How should the reclassification of the investment be accounted for?
True/FalseIndicate whether the statement is true or false. 1. A liability is recorded as a result of past events or transactions. 2. If the stated interest rate for a bond issue exceeds the market interest rate, the bonds will sell at a discount. 3. Convertible bonds can be exchanged for another form of security, such as common stock, at the option of the issuer. 4. If a lease transfers ownership of the property to the lessee by the end of the lease term, it will be classified as a capital lease by the lessee. 5. The acquisition cost of property includes only the original purchase price or equivalent value. 6. When property is acquired by issuing securities, the transaction is always recorded at the fair market value of the asset acquired. 7. Depreciation is the systematic and rational allocation of asset cost over the periods benefitted by the use of the asset. 8. The…
Some financial instruments such as convertible bonds, preferred stocks, warrants and options can have both debt and shareholder’s equity features. They can be converted into common stock or into preferred stocks by investors. This topic has been debated for several years on whether: Viewpoint 1: Issuers should account for an instrument with both liability and equity characteristics entirely as a liability or entirely as an equity instrument depending on which characteristic governs. Viewpoint 2: Issuers should account for an instrument as consisting of a liability component and an equity component that should be accounted for separately. Which of the two viewpoints do you favor? Develop an argument in support of your choice. In considering this question, you should disregard the current position of the FASB on the issue. Instead, focus on conceptual issues regarding the practicable and theoretically appropriate treatment, unconstrained by US GAAP and IFRS. Also, focus your…
Describe the accounting treatment for convertible debt and for debt issued with detachable stock warrants. How does the treatment differ and what justification does FASB use for requiring different treatment?.
A put provision gives the investor the right but not the obligation to sell the bond back to the company. True False
Potential ordinary shares include the following, except: a. financial liabilities (or equity instruments), including preference shares, that are convertible into ordinary shares b. options and warrants c. shares that would be issued upon the satisfaction of conditions resulting from contractual arrangements, such as the purchase of a business, or other assets d. treasury shares that have been canceled e. none of the above