Windsor Corporation issued 20-year, $10,600,000 face value, 10% convertible debentures on January 1, 2020. The bonds have a par value of $1,000, with interest payable semiannually. The initial conversion ratio is 10:1, and in 3 years it will increase to 12:1. At the date of issue, the bonds were sold at 105. Bond premium is amortized on a straight-line basis. Windsor's effective tax rate was 40%. Net income in 2020was $25,300,000, and the company had 13,400,000 common shares issued and outstanding during the entire year. Compute both basic and diluted earnings per share. (Round answers to 2 decimal places, e.g. 2.55.) Basic earnings per share Diluted earnings per share %24 %24

Windsor Corporation issued 20-year, $10,600,000 face value, 10% convertible debentures on January 1, 2020. The bonds have a par value of $1,000, with interest payable semiannually. The initial conversion ratio is 10:1, and in 3 years it will increase to 12:1. At the date of issue, the bonds were sold at 105. Bond premium is amortized on a straight-line basis. Windsor's effective tax rate was 40%. Net income in 2020was $25,300,000, and the company had 13,400,000 common shares issued and outstanding during the entire year. Compute both basic and diluted earnings per share. (Round answers to 2 decimal places, e.g. 2.55.) Basic earnings per share Diluted earnings per share %24 %24

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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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.
Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
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