tzmir A.S. issued convertible bonds at their face value of 113.000 lira on December 31. 2017. The bonds have a 10-year life with interest of 12 percent payable annually. At the date of issue, the prevailing interest rate for similar debt without a conversion option was 14 percent. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be coverted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: a. Prepare journal entries for this compound financial instrument for the year ending December 31. 2017, under (1) IFRS and (2) U.S. GAAP. b. Prepare the entry(ies) that the U.S. parent would make on the December 31. 2017, conversion worksheet to convert IFRS balances to U.S. GAAP

tzmir A.S. issued convertible bonds at their face value of 113.000 lira on December 31. 2017. The bonds have a 10-year life with interest of 12 percent payable annually. At the date of issue, the prevailing interest rate for similar debt without a conversion option was 14 percent. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be coverted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: a. Prepare journal entries for this compound financial instrument for the year ending December 31. 2017, under (1) IFRS and (2) U.S. GAAP. b. Prepare the entry(ies) that the U.S. parent would make on the December 31. 2017, conversion worksheet to convert IFRS balances to U.S. GAAP

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter7: Financial Activities

Section: Chapter Questions

Problem 10QE

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On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Izmir A.S. issued convertible bonds at the face value of 113,000 lira on December 31, 2017. The bonds have a 10-year life with interest of 12 percent payable annually. At the date of issue, the prevailing interest rate for similar debt without a conversion option was 14 percent. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated finanacial statements. Ignore income taxes. Required; a. Prepare journal entries for this compound financial instrument for the year ending December31, 2017, under (1) IFRS and (2) U,S. GAAP. b. Prepare the entries that the U.S. parent would make on the December 31, 2017, conversion worksheet to convert IFRS balances to U.S. GAAP
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On 1 July 2022, SFU Co issued a convertible bond at par value of $20 million and has recordedit as a non-current liability. The bond is redeemable for cash on 30 June 2024 at par. Bondholderscan however, opt for the conversion in the form of a fixed number of shares. Interest on the bondis payable at a rate of 4% a year in arrears. The interest paid in the year has been presented asfinance cost. The interest rate on similar debt without a conversion option is 10%, with a presentvalue of $17,91 million at 1 July 2022. Discuss how the convertible bonds should be accounted for during the 2023 financialperiod. Please also show the calculations for my understanding
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On January 1, 2019, Lin plc issued a convertible bond with a par value of £50,000 inthe market for £60,000. The bonds are convertible into 6,000 ordinary shares of £1 per sharepar value. The bond has a 5-year life and has a stated interest rate of 10% payable annually.The market interest rate for a similar non-convertible bond on January 1, 2019, is 8%. Theliability component of the bond is computed to be £53,993. The following bond amortizationschedule is provided for this bond.Effective-Interest Method10% Bond Discounted at 8%Date Cash Paid InterestExpense PremiumAmortized Carrying Amountof Bonds1/1/19 £53,99312/31/19 £5,000 £4,319 £681 53,31212/31/20 5,000 4,265 735 52,57712/31/21 5,000 4,206 794 51,78312/31/22 5,000 4,143 857 50,92612/31/23 5,000 4,074 926 50,000 Prepare the journal entry to record the conversion on December 31, 2021. Assume thatthe accrual of interest related to 2021 has been recorded.d. Assume that the convertible bonds were repurchased on December 31, 2021,…
On January 1, 2019, Lin plc issued a convertible bond with a par value of £50,000 inthe market for £60,000. The bonds are convertible into 6,000 ordinary shares of £1 per sharepar value. The bond has a 5-year life and has a stated interest rate of 10% payable annually.The market interest rate for a similar non-convertible bond at January 1, 2019, is 8%. Theliability component of the bond is computed to be £53,993. The following bond amortizationschedule is provided for this bond.Effective-Interest Method10% Bond Discounted at 8%Date Cash Paid InterestExpense PremiumAmortized Carrying Amountof Bonds1/1/19 £53,99312/31/19 £5,000 £4,319 £681 53,31212/31/20 5,000 4,265 735 52,57712/31/21 5,000 4,206 794 51,78312/31/22 5,000 4,143 857 50,92612/31/23 5,000 4,074 926 50,000Instructionsa. Prepare the journal entry to record the issuance of the convertible bond on January 1,2019.b. Prepare the journal entry to record the payment of interest on December 31, 2020.c. Assume that the bonds were…
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