Bridgewater Corp. offered holders of its 1,000 convertiblebonds a premium of $160 per bond to induce conversioninto shares of its common stock. Upon conversionof all the bonds, Bridgewater Corp. recorded the$160,000 premium as a reduction of paid-in capital.Comment on Bridgewater’s treatment of the $160,000“sweetener.”
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Bridgewater Corp. offered holders of its 1,000 convertible
bonds a premium of $160 per bond to induce conversion
into shares of its common stock. Upon conversion
of all the bonds, Bridgewater Corp. recorded the
$160,000 premium as a reduction of paid-in capital.
Comment on Bridgewater’s treatment of the $160,000
“sweetener.”
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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.Mills Company had five 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 convertible security is described in the following table. The 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 the securities would be included in the diluted earnings per share computations.On July 1, 2023, Tien Limited called its 9% convertible bonds for conversion. The $10 million of par value bonds were converted into 1 million common shares. On July 1, there was $75,000 of unamortized discount applicable to the bonds, and the company paid an additional $65,000 to the bondholders to induce conversion of all the bonds. At the time of conversion, the balance in the account Contributed Surplus—Conversion Rights was $270,000, and the bond’s fair value (ignoring the conversion feature) was $9,955,000. The company records conversion using the book value method. Prepare the journal entries if Tien prepares its financial statements using IFRS and if it uses ASPE. Can someone please explain what the difference is between IFRS and ASPE and how they got the number in the journal entries, thanks! Please donot provide solution in image format provide solution in step by step format and fast solution
- On July 1, 2021, after recording interest and amortization, BLUE Company converted ₱5,000,000 of its 12% convertible bonds into 50,000 shares of ₱10 par value ordinary share. On the conversion date, the carrying amount of the bonds was ₱6,000,000, the market value of the bonds was ₱6,500,000 and BLUE's ordinary shares was publicly trading at ₱150 per share. BLUE incurred ₱200,000 in connection with the conversion. What amount of additional share premium should BLUE record as result of the conversion?On July 1, 2021, after recording interest and amortization, BLUE Company converted ₱5,000,000 of its 12% convertible bonds into 50,000 shares of ₱10 par value ordinary share. On the conversion date, the carrying amount of the bonds was ₱6,000,000, the market value of the bonds was ₱6,500,000 and BLUE's ordinary shares was publicly trading at ₱150 per share. BLUE incurred ₱200,000 in connection with the conversion. What amount of additional share premium should BLUE record as result of the conversion? ₱ 5,800,000 ₱ 5,300,000 ₱ 6,000,000 ₱ 5,500,000Show your solution in good accounting form. On July 1, 2021, after recording interest and amortization, BLUE Company converted ₱5,000,000 of its 12% convertible bonds into 50,000 shares of ₱10 par value ordinary share. On the conversion date, the carrying amount of the bonds was ₱6,000,000, the market value of the bonds was ₱6,500,000 and BLUE's ordinary shares was publicly trading at ₱150 per share. BLUE incurred ₱200,000 in connection with the conversion. What amount of additional share premium should BLUE record as result of the conversion? A. ₱ 6,000,000 B. ₱ 5,500,000 C. ₱ 5,800,000 D. ₱ 5,300,000
- On July 1, 2019, when its $1 par value common stock was selling for $66 per share, Kingbird Corp. issued $24,900,000 of 6% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into 10 shares of the corporation’s common stock. The debentures were issued for $26,394,000. The corporation believes the difference between the par value and the amount paid is attributable to the conversion feature. On January 1, 2020, the corporation’s common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2021, when the corporation’s $0.50 par value common stock was selling for $38 per share, holders of 9,960 of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.(a) Prepare in general journal form the entry to record the original issuance of the convertible debentures. (Credit account…On July 1, 2023, after recording interest and amortization, Berting Company converted P2 million bonds of its 12% convertible bonds into 50,000 ordinary shares, P25 par value. On the conversion date, the carrying amount of the bonds was P2,600,000 and the paid in capital arising from the conversion privilege recognized in the accounts is P150,000. The market value of the bonds without the conversion privilege was P2,800,000 and Berting Company’s ordinary share was publicly traded at P45 each. What amount of share premium should Berting Company record as a result of the conversion? 1,500,000 1,350,000 500,000 350,000On January 1, 2018, when its $30 par value common stock was selling for$80 per share, a corporation issued $10 million of 10% convertibledebentures due in 10 years. The conversion option allowed the holder ofeach $1,000 bond to convert it into six shares of the corporation's $30 parvalue common stock. The debentures were issued for $11 million. At the time of issuance, the present value of the bond payments was $8.5 million,and the corporation believes the difference between the present value andthe amount paid is attributable to the conversion feature. On January 1,2019, the corporation's $30 par value common stock was split 3 for 1. OnJanuary 1, 2020, when the corporation's $10 par value common stock was selling for $90 per share, holders of 40% of the convertible debenturesexercised their conversion options. The corporation uses the straight-linemethod for amortizing any bond discounts or premiums. Required: 1. Prepare the journal entry to record the original issuance of…
- On July 1, year 8, after recording interest and amortization, Acteon Company converted $1,000,000 of its 5% convertible bonds into 50,000 shares of $1 par value common stock. On the conversion date the fair value of the bonds was $1,250,000, Acteon’s common stock was publicly trading at $21 per share, and the unamortized bond premium and bond issue costs were $30,000 and $50,000, respectively. Using the book value method, what amount of additional paid-in capital should Acteon record as a result of the conversion?Richmond Co. sold convertible bonds at a premium. Interest is paid on May 31 and November 30. On May 31, after interest was paid, 100, $1,000 bonds are tendered for conversion 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 into ordinary shares under the book value method? Discuss the rationale for this method.On January 1, 2020, LKI Company converted its 12%, P1,500,000 face value bonds payable with carrying amount of P1,552,049 for 20,000 ordinary shares with a par value of P50. The bonds were originally issued to yield 10%. The fair value of the bonds on the date of retirement is P1,600,000. Assuming that the bonds are convertible and the share premium from conversion option was P60,000. How much is the gain (loss) on conversion of the bonds to be recognized in the profit or loss during the period? (Round off present value factors up to four decimal places, in presenting your final answer round-up to the nearest peso)
