Question

Does a premium for a convertible bond reduce the amount of interest expense used when calculating...

Does a premium for a convertible bond reduce the amount of interest expense used when calculating diluted EPS?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution:-

Does a premium for a convertible bond reduce the amount of interest expense used when calculating diluted EPS:-

Yes

Explanation:-

The Bonds Payable and Premium accounts are closed and replaced by the Common Stock and Paid-in Capital in Excess of Par accounts.

If the bond was sold at a premium or discount, the interest adjustment in the numerator must take this into account. Discounts increase interest expense while premiums reduce interest expense.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Why does a bond discount have a higher interest interest expense than a bond premium
Why does a bond discount have a higher interest interest expense than a bond premium
When bonds are issued at a premium, the interest rate used to calculate interest expense will...
When bonds are issued at a premium, the interest rate used to calculate interest expense will be the contractual rate. amortized cost of the bonds will increase with successive amortization. interest paid to bondholders will increase after each interest payment date. amount of premium amortized will get larger with successive amortization.
Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells...
Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware issued $35,000,000 of five-year, 12% bonds at a market (effective) interest rate of 10%, with interest payable semiannually. Compute the following, presenting figures used in your computations: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 5 and Exhibit 7. Round to...
Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells...
Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $10,000,000 of four-year, 13% bonds at a market (effective) interest rate of 11%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 5 and Exhibit 7. Round to the nearest dollar. $ b....
1.If a bond sells at a premium, (A)interest expense can not be calculated. (B)cash interest will...
1.If a bond sells at a premium, (A)interest expense can not be calculated. (B)cash interest will equal interest expense each period. (C)interest expense exceeds cash interest each period. (D)cash interest exceeds interest expense each period. 2. A bond will sell at a discount when (A)the stated rate is less than the market rate (B)the stated rate is more than the market rate (C)interest rates fall (D)the company's stock price goes down
Date Cash Paid Interest expense Premium Amortization Carrying Amount of Bonds
Date Cash Paid Interest expense Premium Amortization Carrying Amount of Bonds Intel Inc. is the pioneer in the manufacture of microprocessor for computers. On 4/1/2016, Intel issued $800,000 of 12% face value bonds for $851,705.70. The bonds are due in 4 years, and pay interest semiannually on September 30 and March 31. Intel sold the bonds to yield 10%. Use the spreadsheet found in the link at the bottom to prepare a bond interest expense and premium amortization schedule using...
Bond Premium, Entries for Bonds Payable Transactions, Interest Method of Amortizing Bond Premium Rodgers Corporation produces...
Bond Premium, Entries for Bonds Payable Transactions, Interest Method of Amortizing Bond Premium Rodgers Corporation produces and sells football equipment. On July 1, Year 1, Rodgers Corporation issued $ $68,000,000 of 20-year, 14% bonds at a market (effective) interest rate of 12%, receiving cash of $78,214,960. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries with a compound transaction, if an...
Litke Corporation issued at a premium of $10,000 a $200,000 bond issue convertible into 4,000 shares...
Litke Corporation issued at a premium of $10,000 a $200,000 bond issue convertible into 4,000 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $4,000, the market value of the bonds is $220,000, and the stock is quoted on the market at $60 per share. If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds?
b. Compute the amount of the bond interest expense for the first year. Round amounts to...
b. Compute the amount of the bond interest expense for the first year. Round amounts to the nearest dollar. Annual interest paid $ Discount amortized Interest expense for first year $ Amortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $21,000,000 of 5-year, 11% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 13%, resulting in Ebert receiving cash of $19,490,429. The...
Which of the following is true with regard to amortizing a bond premium or discount? A....
Which of the following is true with regard to amortizing a bond premium or discount? A. The straight-line method recognizes the same amount of interest expense each period, but less total interest expense than the effective-interest method. B. The straight-line method recognizes the same amount of interest expense each period, but more total interest expense than the effective-interest method. C. The straight-line method recognizes the same amount of interest expense each period and the same total interest expense as the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT