Convertible Debt – SHOW ALL CALCULATIONS Nexus Ltd. issued convertible bonds on July 1, 2004. The $5,000,000 bonds pay annual interest of 8% each July 1 and mature on July 1, 2020. Each $1,000 bond is convertible into 50 common shares at the investor’s option. Nexus received proceeds of $5,350,000 for the bond at issue date. The market (yield) rate is 9%.Required:Prepare the journal entry on Nexus’ books at issuance using the incremental method. Assume Nexus decided to repay (retire) the bonds early on July 1, 2008, after interest is recorded. Record the early repayment assuming Nexus pays investors $5,095,000 of which $728,000 is allocated to the conversion rights.Instead of part b) assume investor’s decided to convert 30% of their bonds at July 1, 2008, after interest is recorded. Record the conversion on Nexus’ books.

Journal entries refer to the process of keeping a chronological record of all the activities or…

Answered: yield) rate is 9%. Required: Prepare…

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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Convertible Debt – SHOW ALL CALCULATIONS

Nexus Ltd. issued convertible bonds on July 1, 2004. The $5,000,000 bonds pay annual interest of 8% each July 1 and mature on July 1, 2020. Each $1,000 bond is convertible into 50 common shares at the investor’s option. Nexus received proceeds of $5,350,000 for the bond at issue date. The market (yield) rate is 9%.

Required:

Prepare the journal entry on Nexus’ books at issuance using the incremental method.
Assume Nexus decided to repay (retire) the bonds early on July 1, 2008, after interest is recorded. Record the early repayment assuming Nexus pays investors $5,095,000 of which $728,000 is allocated to the conversion rights.
Instead of part b) assume investor’s decided to convert 30% of their bonds at July 1, 2008, after interest is recorded. Record the conversion on Nexus’ books.

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