A firm has an outstanding bond with a $1,000 par value that is convertible at $40 per share of common stock. If the current market value of common stock per share is $45, the conversion value of the bond is a. 1,000 b. 880 c. 1,125 d. 1,200
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A firm has an outstanding bond with a $1,000 par value that is convertible at $40 per share of common stock. If the current market value of common stock per share is $45, the conversion
a. 1,000
b. 880
c. 1,125
d. 1,200
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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.Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?A firm has an outstanding bond with a P1,000 par value that is convertible into 20 shares of common stock. The bond's conversion ratio is Format: 11
- A firm has an outstanding bond with a $1,000 par value that is convertible into 50 shares of common stock. The bond's conversion ratio is a. 20 b. 25 c. 50 d.100V6. 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?A firm has an outstanding 15-year convertible bond issue with a $1,000 par value and a stated annual interest rate of 7 percent. The bond is convertible into 50 shares of common stock which has a current market price of $25. A straight bond could have been sold with a 10 percent stated interest rate. The straight value of the bond is ________. A. $1,217 B. $1,328 C. $772 D. $972
- Sweet Company has bonds payable outstanding in the amount of $650,000, and the Premium on Bonds Payable account has a balance of $7,700. Each $1,000 bond is convertible into 20 shares of preferred stock of par value of $50 per share. All bonds are converted into preferred stock.Assuming that the book value method was used, what entry would be made?Grouper Company has bonds payable outstanding in the amount of $350,000, and the Premium on Bonds Payable account has a balance of $7,400. Each $1,000 bond is convertible into 20 shares of preferred stock of par value of $50 per share. All bonds are converted into preferred stock. Assuming that the book value method was used, what entry would be made?Vargo Company has bonds payable outstanding in the amount of $500,000, and the Premium on Bonds Payable account has a balance of $7,500. Each $1,000 bond is convertible into 20 shares of preferred stock of par value of $50 per share. All bonds are converted into preferred stock. Instructions Assuming that the book value method was used, what entry would be made?
- a company has a 1000 bond that is convertable into 100 shares of common stock par vale 10. how will this conversion impact earnings per share if the company chooses to convert the debt?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.A $1,000 corporate bond is convertible to 40 shares of the corporation's common stock. What is the minimum price that the stock must obtain before bondholders would consider converting the bond to stock?
