Carla Vista Corp. offers three-year, 6% convertible bonds (par $1,000). Each $1,000 bond may be converted into 145 common shares, which are currently trading at $3 per share. Similar straight bonds carry an interest rate of 9%. 1,000 bonds are issued at par. The Contributed Surplus - Conversion rights amounted to be $75,939. Carla Vista Corp. decides to retire the convertible debt early and offers the bondholders $1,070,100 cash, which is the fair value of the instrument at the time of early retirement. The fair value of the bond (excluding the conversion feature) is $982,500 and the carrying value is $972,700. Assume ASPE is followed. Prepare the journal entry to record the retirement of the convertible debt. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles Debit Credit

Carla Vista Corp. offers three-year, 6% convertible bonds (par $1,000). Each $1,000 bond may be converted into 145 common shares, which are currently trading at $3 per share. Similar straight bonds carry an interest rate of 9%. 1,000 bonds are issued at par. The Contributed Surplus - Conversion rights amounted to be $75,939. Carla Vista Corp. decides to retire the convertible debt early and offers the bondholders $1,070,100 cash, which is the fair value of the instrument at the time of early retirement. The fair value of the bond (excluding the conversion feature) is $982,500 and the carrying value is $972,700. Assume ASPE is followed. Prepare the journal entry to record the retirement of the convertible debt. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles Debit Credit

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 4EA: On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated...

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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?
Marinara, Inc. issued a 3-year term 2,000 convertible bonds on January 1, 2021 at 110 with a face value of P1,000 per bond. Interest is payable on annual basis at a stated rate of 6%. The said bonds may be converted anytime into 100 shares with par value of P5. From the time of the issuance of the convertible bonds, the prevailing market rate for similar debt without any conversion feature is 9%. Present value factor of P1 lumpsum using 9% for 3 periods is .77 Present value factor of P1 ordinary annuity using 9% for 3 periods is 2.53 Required: What is the liability component of the issuance of the convertible bonds on January 1, 2021? What is the equity component of the issuance of the convertible bonds on January 1, 2021?
Florence Inc. issued 8,000, 5-year convertible bonds of $2,000 each for $4,000,000 at the beginning of 2021. The bonds have a stated rate of interest of 9% and interest is payable annually. Each bond can be convertible into 100 shares with a par value of $10. The market rate of similar nonconvertible debt is 10%. Determine the fair value of the equity component using the “with-and-without” method is a. $3,848,288 b. $2,483,600 c. $1,365,688 d. $151,712
On June 30, 2005 Jolie Co. issues $300,000 of 10 year, 11% bonds. The bonds pay interestsemiannually on June 30th and December 31st. The bonds have a call provision which allowsJolie Co. to repurchase them at a price of 108 any time after the first year. The market yield forthe bonds at the date of issue is 10%. Jolie Co. pays $10,000 in issuance costs.Other information:a. Jolie has a December 31st year end.b. Jolie calls the bonds on 3/31/07, exactly three months after the last coupon payment wasmade. The market price at this time is 112.c. The enacted tax rate is 40% for all years. Question: At what premium or discount does this issue sell?
Webber Corp. issued $5,000,000 of 5% bonds on May 1 at par value. The bonds were dated January 1. The company pays interest on June 30 and December 31 each year. How much will the buyer need to pay the company in accrued interest at purchase and how much will the buyer receive in interest on June 30? Group of answer choices pay May 1 $125,000; receive June 30 $125,000 pay May 1, $0; receive June 30 $125,000 pay May 1 $125,000; receive June 30 $83,333 pay May 1 $83,333; receive June 30 $125,000
Irbid Corporation issues 3,000 convertible bonds at January 1, 2018. The bonds have a three year life, and are issued at par with a face value of JOD1,000 per bond, giving total cash proceeds of JOD4,000,000. Interest is payable annually at 6 percent. Each bond is convertible into 250 ordinary shares (par value of JOD1). When the bonds are issued, the market rate of interest for similar debt without the conversion option is 8%. Required: Compute the liability and equity component of the convertible bond on January 1, 2018.
Enviro Company issues 8%, 10-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 5%, which implies a selling price of 123.375. The straight-line method is used to allocate interest expense. 1. What are the issuer’s cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What is the amount of bond interest expense recorded on the first interest payment date?
On January 1, 2019, Mayleen Company issued 5,000 convertible bonds with P1,000 face value per bond. The bonds matures in three years and are issued at 110. Interest is payable annually every December 31 at nominal 6% interest rate. Each bonds is convertible at anytime up to maturity into 100 shares with par value of P5. It is reliably determined that the bonds would sell only at P4,600,000 without the conversion privilege. What is the equity component of the original issuance of the convertible bonds?
On December 31, 2019, OLGA Inc. sold convertible bonds to Nuttin Corp. for$38,375,000. The bonds have a face value of $40,000,000, a term of 10 years and coupon payments each June 30 and December 31 at 5% per annum. The yield to maturity on similar bonds without the conversion feature is 6%. The bonds areconvertible into 10 common shares for each $1,000 bond. OLGA Inc. reports under IFRS. Prepare the journal entry that OLGA Inc. should record for the issuance of these bonds at December 31, 2019
ngela Corporation issues 2,000 convertible bonds at January 1, 2019. The bonds have a 3-year life, and are issued at par with a face value of $1,000 per bond, giving total proceeds of $2,000,000. Interest is payable annually at 6%. Each bond is convertible into 250 ordinary shares (par value of $1). When the bonds are issued, the market rate of interest for similar debt without the conversion option is 8%. Instructions a. Compute the liability and equity component of the convertible bond on January 1, 2019. b. Prepare the journal entry to record the issuance of the convertible bond on January 1, 2019. c. Prepare the journal entry to record the repurchase of the convertible bond for cash at January 1, 2022, its maturity date.
On December 31, 2020, Tamia Company showed the following balances: 4,000,000 Bonds payable -6% Discount on bonds payable Share premium – issuance Share premium- conversion privilege 500,000 5,000,000 700,000 The interest is payable annually every December 31. The convertible bonds are not converted but fully paid December 31, 2020. On such date, the quoted price of the convertible bonds with conversion option is 105 which is the payment to the bondholders plus interest. However, the quoted price of the bonds without the conversion privilege is 95.
On January 1 , 2021, Gray Co. issued its 10%, 4-year convertible debt instrument with a face amount of P 4,000,000 for P 4,400,000. Interest is payable every Dec. 31 of year year. The debt instrument is convertible into 35,000 ordinary shares with a par value of P 100. When the debt instruments were issued, the prevailing market rate of interest for similar debt without conversion option is 8%. PV of 8% for an ordinary annuity of P 1 after 4 years 3.312 PV of 8 % after 4 interest periods. .735 What is the balance of the unamortized premium on debt instrument as of Dec. 31, 2021?