Young Ltd issued 2 000 convertible bonds on 1 January 2015. The bonds have a threeyear term, and are issued at fair value and a face value of $1000 per bond, giving totalproceeds of $2 000 000. Interest is payable annually in arrears at a nominal annualinterest rate of 6% per annum. Each bond is convertible at the option of the holder into afixed number of ordinary shares at any time up to maturity. On 1 January 2015, a marketrelated discount rate for a basic three-year debt instrument for Young Ltd is 10% perannum. On 31 December 2015, it seemed very likely that the holder will exercise his rightto convert the bonds into a fixed number of ordinary shares in the next two months.However, by 31 December 2017, the holder had not exercised this right and the bondswere settled in cash by Young Ltd.Required:a) Explain how the convertible bonds are initially recognised, in accordance withIFRS9: Financial Instruments.b) Prepare the journal entries to account for convertible bonds in the financialstatements of Young Ltd from 1 January 2015 to 31 December 2017.3:38 pm

According to IFRS 9, a convertible bond is a compound financial instrument, which consists of a…

Answered: Young Ltd issued 2 000 convertible…

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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ABC Co. issued 1.000 convertible bonds at the beginning of 2019. The bonds have a four-year term with a stated rate of interest of 6 percent, and are issued at par with a face value of Rp1.000 per bond (the total proceeds received from issuance of the bonds are Rp1.000.000). Interest is payable annually at December 31. Each bond is convertible into 250 ordinary shares with a par value of Rp1. The market rate of interest on similar non-convertible debt is 9 percent. On December 31, 2020, ABC wishes to reduce its annual interest cost. The company agrees to pay the holder of its convertible bonds an additional Rp40.000 if they will convert. Assuming conversion occurs, ABC’s journal entry to record the conversion will include all of the following, except:
Tano issues bonds with a par value of $94,000 on January 1, 2017. The bonds' annual contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8% and the bonds are sold for $89,071. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare an amortization table using the straight-line method to amortize the discount for these bonds. Complete this question by entering your answers in the tabs below. Required 3 Prepare an amortization table using the straight-line method to amortize the discount for these bonds. (Round your intermediate calculations to the nearest dollar amount.) Required 1 Required 2 Semiannual Period- Unamortized Discount End 01/01/2017 06/30/2017 12/31/2017 06/30/2018 12/31/2010 06/30/2019 12/31/2019 Carrying Value Required 2
On January 1, 2016, Saul Company issued convertible bonds with a face amount of P 5,000,000 for P 6,000,000. The bonds are convertible into 50,000 shares with P 100 par value. The bond have a 5-year life with 10% stated interest rate payable annually every December 31. The fair value of the convertible bonds without conversion option is computed at P 5,399,300 on January 1, 2016. On Dec. 31, 2018, the convertible bonds were not converted but fully paid for P5,550,000. On such date, the fair value of the bonds without conversion privilege is P 5,400,000 and the carrying amount is P 5,178,300. What is the loss on the extinguishment of the convertible bonds payable on December 31, 2018?
On January 1, 2015, Loop Raceway issued 600 bonds, each with a face value of $1,000, a statedinterest rate of 5% paid annually on December 31, and a maturity date of December 31, 2017. Onthe issue date, the market interest rate was 6 percent, so the total proceeds from the bond issuewere $583,950. Loop uses the straight-line bond amortization method and adjusts for any roundingerrors when recording interest in the final year.Required:1. Prepare a bond amortization schedule.2. Give the journal entry to record the bond issue.3. Give the journal entries to record the interest payments on December 31, 2015 and 2016.4. Give the journal entry to record the interest and face value payment on December 31, 2017.5. Assume the bonds are retired on January 1, 2017, at a price of 98. Give the journal entries torecord the bond retirement.
Hartford Research issues bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds have a $40,000 par value and an annual coupon rate of 10%, and they mature in 10 years. Required For each of the following three separate situations, (a) determine the bonds’ issue price on January 1, 2015, and (b) prepare the journal entry to record their issuance. The market rate at the date of issuance is 8%. The market rate at the date of issuance is 10%. The market rate at the date of issuance is 12%.
On 1 January 20x2, Company A issued a convertible bond with principal amount of USD200,000, with maturity date of 31 December 20x3. The proceeds from the convertible bond is USD210,000. The coupon rate was 3% per annum payable at year-end. A similar bond issued by company A, but without the convertible feature had coupon rate of 4% per annum. Requirement Record the journal entries on 1 January 20x2 and 31 December 20x3. show me the calculations

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