Angela Corporation issues 2,000 convertible bonds at January 1, 2019. The bonds have a 3-year life, and
Question:
Angela Corporation issues 2,000 convertible bonds at January 1, 2019. The bonds have a 3-year life, and are issued at par with a face value of $1,000 per bond, giving total proceeds of $2,000,000. Interest is payable annually at 6%. Each bond is convertible into 250 ordinary shares (par value of $1). When the bonds are issued, the market rate of interest for similar debt without the conversion option is 8%.
Instructions
a. Compute the liability and equity component of the convertible bond on January 1, 2019.
b. Prepare the journal entry to record the issuance of the convertible bond on January 1, 2019.
c. Prepare the journal entry to record the repurchase of the convertible bond for cash at January 1, 2022, its maturity date.
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Step by Step Answer:
a Present Value of Principal 2000000 X 79383 1587660 Present Value of Interest Payments 12000...View the full answer
Intermediate Accounting
ISBN: 978-1119503668
17th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel
