Faith Company issued 5500 convertible bonds on January 1, 2019. The bonds have a three-year term and are issued at 110 with a face value of 1,000 per bond. Interest is payable annually in arrears at a nominal 6% interest rate. Each bond is convertible at any time up to maturity into 100 common shares with par value of 5. When the bonds are issued, the prevailing market interest rate for similar debt instrument without conversion option is 9%. The present value of 1 at 9% for 3 periods is 0.77 and the present value of an ordinary annuity of 1 at 9% for 3 periods is 2.53 Suppose that the company converted the bonds on December 31, 2019, Prepare the entries on the bonds during 2019.
Faith Company issued 5500 convertible bonds on January 1, 2019. The bonds have a three-year term and are issued at 110 with a face value of 1,000 per bond. Interest is payable annually in arrears at a nominal 6% interest rate. Each bond is convertible at any time up to maturity into 100 common shares with par value of 5. When the bonds are issued, the prevailing market interest rate for similar debt instrument without conversion option is 9%. The present value of 1 at 9% for 3 periods is 0.77 and the present value of an ordinary annuity of 1 at 9% for 3 periods is 2.53 Suppose that the company converted the bonds on December 31, 2019, Prepare the entries on the bonds during 2019.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 21E: On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be...
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