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Andrews Comics issues 10-year semiannual, convertible 5.5% bonds with a face value of 1,250,000. The bonds were issued at 96. Comparable bonds without a conversion
Andrews Comics issues 10-year semiannual, convertible 5.5% bonds with a face value of 1,250,000. The bonds were issued at 96. Comparable bonds without a conversion feature would have required 8.75%.
- What is the market rate of interest on the bonds?
- Determine how much of the proceeds would be allocated to debt and how much to equity.
- Give the journal entry to record the issuance under IFRS and the journal entries for the first and second interest payments. You may use the chart below to calculate the amounts.
Interest periods | Interest to be paid | Interest expense | Amortization | Unamortized portion | Bond carrying amount |
Issue |
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1 |
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2 |
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Issuance
First Interest Payment
Second Interest Payment
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