25) Harrell's Barrels issued $100 million of 6% convertible bonds at 101. Each $1,000 bond is convertible into 45 shares of Harrell's no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 98. Harrell applies International Financial Reporting Standards. Recording the issuance of the bonds would cause an increase in Harrell's: A) shareholders' equity of $1,000,000. B) shareholders' equity of $3,000,000. C) assets of $98,000,000. D) liabilities of $101,000,000.
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- On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were issued on May 4. The 7% convertible bonds have a face value of 80,000 and were issued in 2016 at par. Each 1,000 bond is convertible into 25 shares of common stock; to date, none of the bonds have been converted. During 2019, the company earned net income of 79,200 and was subject to an income tax rate of 30%. Required: Compute the 2019 diluted earnings per share.
- 1. Richmond Co. sold convertible bonds at a premium. Interest is paid on May 31 andNovember 30. On May 31, after interest was paid, 100, $1,000 bonds are tendered forconversion into 3,000 shares of $10 par value ordinary shares that had a market price of$40 per share. How should Richmond Co. account for the conversion of the bonds intoordinary shares under the book value method? Discuss the rationale for this method. 2. Wilson's Corporation is one of your new audit clients. The corporation's accountant isuncertain how to report earnings per share in accordance with IFRS and is requesting thatyou provide the following information:Define the term 'earnings per share' as it applies to a corporation with a capitalizationstructure composed of only one class of ordinary shares. Explain how earnings per shareshould be computed and how the information should be disclosed in the corporation'sfinancial statements.Cove Corp. issued 6% bonds with a maturity value of P6,000,000, together with 100,000 shares of its P5 par value ordinary shares, for a combined cash amount of P11,000,000. The market value of Cove's shares cannot be ascertained. If the bonds were issued separately, they would have sold for P4,000,000 on an 8% yield to maturity basis. What amount should Cove report for share premium on the issuance of the shares? a. P4,500,000 b. P6,500,000 c. P5,000,000 d. P7,000,000Cove Corp. issued 6% bonds with a maturity value of P6,000,000, together with 100,000 shares of its P5 parvalue ordinary shares, for a combined cash amount of P11,000,000.The market value of Cove's shares cannot be ascertained. If the bonds were issued separately, they would have sold for P4,000,000 on an 8% yield to maturity basis. What amount should Cove report for share premium on the issuance of the shares? a.P7,000,000 b.P6,500,000 c.P5,000,000 d.P4,500,000
- On January 1, 2024, Fowl Products issued $80 million of 6%, 10-year convertible bonds at a net price of $81.6 million. Fowl recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Fowl’s no par common stock. Fowl records interest by the straight-line method. On June 1, 2026, Fowl notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2026. By June 30 all bondholders had chosen to convert their bonds into shares as of the interest payment date. On June 30, Fowl paid the semiannual interest and issued the requisite number of shares for the bonds being converted. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.V6. On January 1, Stunt Corp. had outstanding convertible bonds with a face value of $1,000,000 and an unamortized discount of $100,000. On that date, the bonds were converted into 100,000 shares of $1 par stock. The market value on the date of conversion was $12 per share. The transaction will be accounted for with the book value method. By what amount will Stunt’s stockholders’ equity increase as a result of the bond conversion?On August 31, 2015, Chickasaw Industries issued $25 million of its 30-year, 6% convertible bonds dated August31, priced to yield 5%. The bonds are convertible at the option of the investors into 1,500,000 shares of Chickasaw’s common stock. Chickasaw records interest expense at the effective rate. On August 31, 2018, investors inChickasaw’s convertible bonds tendered 20% of the bonds for conversion into common stock that had a marketvalue of $20 per share on the date of the conversion. On January 1, 2017, Chickasaw Industries issued $40 millionof its 20-year, 7% bonds dated January 1 at a price to yield 8%. On December 31, 2018, the bonds were extinguished early through acquisition in the open market by Chickasaw for $40.5 million.Required:1. Using the book value method, would recording the conversion of the 6% convertible bonds into commonstock affect earnings? If so, by how much? Would earnings be affected if the market value method is used? Ifso, by how much?2. Were the 7% bonds…
- On January 1, 2016, Madison Products issued $40 million of 6%, 10-year convertible bonds at a net price of $40.8 million. Madison recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Madison’s no par common stock. Madison records interest by the straight-line method. On June 1, 2018, Madison notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2018. By June 30 all bondholders had chosen to convert their bonds into shares as of the interest payment date. On June 30, Madison paid the semiannual interest and issued the requisite number of shares for the bonds being converted. Required: 1. Prepare the journal entry for the issuance of the bonds by Madison. 2. Prepare the journal entry for the June 30, 2016, interest payment. 3. Prepare the journal entries for the June 30, 2018, interest payment by Madison and…2. On July 1, 2012, Abysmal Company issued 6% bonds with a maturity value of P6,000,000, together with 10,000 ordinary shares with P50 par value for a combined cash amount of P11,000,000. The market value of the ordinary share cannot be determined. If the bonds were issued separately, the bonds would have sold for P4,000,000 on an 8% yield to maturity basis. What amount should be reported for share premium on the issuance of the ordinary shares? a. 7,500,000 b. 6,500,000 c. 5,500,000 d. 4,500,000