Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 7, Problem 7.8Q
To determine
To explain: Whether it is possible to convert the present value of an ordinary annuity table to the present value of an annuity due table.
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Please provide the answer to this financial accounting question using the right approach.
On January 1, 2024, Sunfish Co. issued a $22 million, 8%, 6-year convertible bond with annual coupon payments. Each $1,000 bond was convertible into 35 shares of Sunfish's common shares. Shark Investments purchased the entire bond issue for $22.7 million on January 1, 2024. Shark estimated that without the conversion feature, the bonds would have sold for $21,013,098 (to yield 9%).
On January 1, 2025, Shark converted bonds with a par value of $8.8 million. At the time of conversion, the shares were selling at $30 each.
Required
Prepare the journal entry to record the issuance of convertible bonds.
Prepare the journal entry to record the conversion according to IFRS (book value method).
Prepare the journal entry to record the conversion according ASPE (market value method).
RoseBud Motel Ltd. (RM) had 100,000 ordinary shares outstanding during all of 2025, all owned by the owner Johnny Rose. In 2023, RM issued $500,000, 3% non-cumulative preferred shares. Each $100 preferred share is convertible into one ordinary share. RM also had 6,000, $100 cumulative preferred shares outstanding that are each entitled to an annual dividend of $1.60. Each preferred share is convertible into two ordinary shares.
RM’s net income for the year ended December 31, 2025, was $400,000. Its income tax rate was 20%. The annual dividend was declared and paid during 2025 on the cumulative preferred shares but not on the non-cumulative shares.
Required
Calculate RM’s basic EPS for 2025.
Are the non-cumulative convertible preferred shares dilutive or antidilutive in nature? The cumulative convertible preferred shares? Support your answer with calculations.
Calculate RM’s diluted EPS for 2025.
Chapter 7 Solutions
Intermediate Accounting
Ch. 7 - Prob. 7.1QCh. 7 - Prob. 7.2QCh. 7 - If interest is compounded more than once a year,...Ch. 7 - Prob. 7.4QCh. 7 - Can an ordinary annuity table be used to determine...Ch. 7 - Prob. 7.6QCh. 7 - Is the present value of an ordinary annuity more...Ch. 7 - Prob. 7.8QCh. 7 - Simple Interest. Assume Shafer Corporation...Ch. 7 - Compound Interest. Assume Shafer Corporation...
Ch. 7 - Prob. 7.3BECh. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Present Value of a Single Sum, Compound Interest....Ch. 7 - Future Value of a Single Sum, Compound Interest....Ch. 7 - Prob. 7.8BECh. 7 - Present Value of a Single Sum, Compounded Interest...Ch. 7 - Prob. 7.10BECh. 7 - Present Value of a Single Sum, Calculating Time...Ch. 7 - Future Value of an Ordinary Annuity. An...Ch. 7 - Future Value of an Annuity Due. Mariah Carey...Ch. 7 - Future Value of an Ordinary Annuity: Calculating...Ch. 7 - Present Value of an Ordinary Annuity. CB...Ch. 7 - Present Value of an Annuity Due, Semiannual...Ch. 7 - Prob. 7.17BECh. 7 - Ordinary Annuity, Annuity Due, Using Interest...Ch. 7 - Prob. 7.2ECh. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Future Value of an Ordinary Annuity, Future Value...Ch. 7 - Single Sum, Solving for Other Variables. Two...Ch. 7 - Ordinary Annuity, Solve for Interest Rate,...Ch. 7 - Present Value, Note Payable Prices. Wiz Khalifa...Ch. 7 - Future Value of a Deterred Annuity. Lenny Shafer...Ch. 7 - Prob. 7.13ECh. 7 - Present Value of an Ordinary Annuity, Present...Ch. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Future Value of an Annuity Due, Decision Making....Ch. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - Prob. 7.21ECh. 7 - Prob. 7.22ECh. 7 - Prob. 7.1PCh. 7 - Present Value, Present Value of an Ordinary...Ch. 7 - Present Value, Present Value of an Annuity Due,...Ch. 7 - Prob. 7.4PCh. 7 - Prob. 7.5PCh. 7 - Prob. 7.6PCh. 7 - Prob. 7.7PCh. 7 - Present Value of an Annuity Due, Deferred...Ch. 7 - Present Value of an Ordinary Annuity, Present...Ch. 7 - Future Value of an Ordinary Annuity, Deferred...Ch. 7 - Present Value, Present Value of an Ordinary...Ch. 7 - Prob. 7.12PCh. 7 - Prob. 7.13PCh. 7 - Expected Cash Flows. Hiteck Electronics sells a...Ch. 7 - Prob. 7.15P
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