Question updated

Appendix 1:

1. Convertible subordinated bonds payable, entitled to annual cash interest at 3.5%. At maturity, the bonds will be settled through the issuance of shares using an exchange price of $12 per share. Interest may also be paid in shares values at $12 per share at the companys option.
2. Preferred shares, carrying a fixed cumulative dividend of $1.50 per share, redeemable at the companys option at $20 per share.
3. Convertible subordinated 8% notes payable. At maturity, the debentures may, at the companys option, be paid out in cash or converted into common shares at the set exchange price of $35 per share.
4. Class C shares, carrying a dividend entitlement equal to $6 per share or an amount equal to common share dividends, whichever is higher, redeemable at the investors option at $55 per share. The company may, at its option, redeem the shares with class A common shares instead of cash, valued at their current market value.

QUESTION Chapter 15 Atlantic Properties ("AP") is a property development company based in Halifax, Nova Scotia. They have an extensive portfolio, with residential and commercial properties in every major Atlantic Canadian city. AP is publicly traded and follows IFRS. You, CPA, work in the accounting department at Atlantic Properties, and have been tasked with classifying the financial instruments listed in Appendix 1 as either equity, liability, or compound. The Board is also concerned about AP's debt to equity ratio. Can you explain how improper classification of a financial instrument may impact this ratio? ASSESS the Situation: maximum 2 sentences ANALYZE Major Issues: maximum 6 sentences CONLUDE: maximum 2 sentences, plus journal entries, if applicable & ADVISE: maximum 2 sentences QUESTION Chapter 15 Atlantic Properties ("AP") is a property development company based in Halifax, Nova Scotia. They have an extensive portfolio, with residential and commercial properties in every major Atlantic Canadian city. AP is publicly traded and follows IFRS. You, CPA, work in the accounting department at Atlantic Properties, and have been tasked with classifying the financial instruments listed in Appendix 1 as either equity, liability, or compound. The Board is also concerned about AP's debt to equity ratio. Can you explain how improper classification of a financial instrument may impact this ratio? ASSESS the Situation: maximum 2 sentences ANALYZE Major Issues: maximum 6 sentences CONLUDE: maximum 2 sentences, plus journal entries, if applicable & ADVISE: maximum 2 sentences