Question
On 1 July 2017 Stark Manufacturers Ltd issues convertible notes at their face value of $7,500,000. The notes are convertible into ordinary shares at the
On 1 July 2017 Stark Manufacturers Ltd issues convertible notes at their face value of $7,500,000. The notes are convertible into ordinary shares at the discretion of the holders. The notes pay interest at the rate of 3% per year each 30 June and mature in 7 years (on 30 June 2024). The company has a 30 June balance date.
On 1 July 2017, comparable debt without the conversion option yields 5% per year.
If the holders convert all their notes to ordinary shares on 1 July 2018, the journal entry credit to Share Capital will be (all numbers are rounded to nearest thousand dollars).
Select one:
a. $7,500,000
b. $7,071,000
c. $6,739,000
d. $7,607,000
e. $868,000
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