Question

Q22:Suppose a firm issues a single bond with a face value of $100,000 which is Convertible...

Q22:Suppose a firm issues a single bond with a face value of $100,000 which is Convertible into 10,000 Ordinary Shares with a Par Value of $1. The credit entry to “Share Premium – Conversion Equity” on the date of issue was for $20,000.   Assume that the maturity date of the bonds has now arrived and the bonds will be converted into Ordinary Shares.

The Entry to the “Share Premium – Conversion Equity” account on the date of conversion will be for an amount of:

a. $10,000

b. $20,000

c. None of these answers

d. $110,000

e. $90,000

Q23: Suppose a firm issues a 1,000 Convertible Preference Shares for with a par value of $100 each. Each preference share is convertible into 5 Ordinary Shares with a par value of $5. The credit entry to “Share Premium – Conversion Equity” on the date of issue was for $200,000.   Assume that the maturity date of the Convertible Shares has now arrived and the Convertible Preference Shares will be converted into Ordinary Shares.

The Entry to the “Share Premium – Conversion Equity” account on the date of conversion will be for an amount of:

a. $250,000

b. None of these answers

c. $210,000

d. $10,000

e. $200,000

Q24: Suppose a firm issues a single bond with a face value of $100,000 which is Convertible into 10,000 Ordinary Shares with a Par Value of $1. The credit entry to “Share Premium – Conversion Equity” on the date of issue was for $20,000.   Assume that the maturity date of the bonds has now arrived and the bonds will be converted into Ordinary Shares.

The Entry to the “Bonds Payable” account on the date of conversion will be for an amount of:

a. None of these answers

b. $110,000

c. $10,000

d. $90,000

e. $20,000

q25: Suppose a firm issues a single bond with a face value of $100,000 which is Convertible into 10,000 Ordinary Shares with a Par Value of $1. The credit entry to “Share Premium – Conversion Equity” on the date of issue was for $20,000.   Assume that the maturity date of the bonds has now arrived and the bonds will be converted into Ordinary Shares.

The Entry to the “Bonds Payable” account on the date of conversion will be for an amount of:

a. $100,000

b. None of these answers

c. $80,000

d. $90,000

e. $10,000

q26: Suppose a firm issues a single bond with a face value of $100,000 which is Convertible into 10,000 Ordinary Shares with a Par Value of $1. The credit entry to “Share Premium – Conversion Equity” on the date of issue was for $20,000.    Assume that the maturity date of the bonds has now arrived and the bonds will be converted into Ordinary Shares.

The Entry to the “Share Premium – Ordinary Shares” account on the date of conversion will be for an amount of:

a. $100,000

b. $90,000

c. $50,000

d. None of these answers

e. $110,000

Homework Answers

Answer #1

Question - (22)

Answer -

Particulars Explanation
The Entry to the “Share Premium – Conversion Equity” account on the date of conversion will be for an amount of $20000.

Journal entry at the maturity date

General Journal Debit ($) Credit ($)

Share Premium--Conversion Equity [Give in question]

Bonds Payable [Give in question]

Share Capital--Ordinary [10000 shares * $1]

Share Premium – Ordinary [Difference]

20000

100000

-

-

-

-

10000

110000

Hence, Option - (b) is Correct.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Sun corp issues $100,000 convertible bonds at a premium. Bonds are convertible into 2,000 shares of...
Sun corp issues $100,000 convertible bonds at a premium. Bonds are convertible into 2,000 shares of common stock (par$40). At the time of conversion, the bonds have a FMV of $110,000, common stock has a FMV of $60 per share and unamortized premium on bonds is $2,000. What is the amount of paid in capital in excess of par on common stock upon coversion?
LIEN company issues $5,600,000 of 12%, 40-year convertible bonds at 103. At the time of conversion,...
LIEN company issues $5,600,000 of 12%, 40-year convertible bonds at 103. At the time of conversion, the Premium on Bonds Payable account has a balance of $150,000. All convertible bonds are converted into common stocks, and each $1,000 bond is convertible into 10 shares of common stock with a par value of $1 per share. 1) Prepare the journal entry to record the issuance of convertible bonds. 2) Prepare the journal entry to record the bond conversion.
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?
Dadayeva Inc. has $5 million of 6% convertible bonds outstanding. Each $1,000 bond is convertible into...
Dadayeva Inc. has $5 million of 6% convertible bonds outstanding. Each $1,000 bond is convertible into 50 no par value common shares. The bonds pay interest on January 31 and July 31. On July 31, 2020, the holders of $1,250,000 of these bonds exercised the conversion privilege. On that date, the market price of the bonds was 110, the market price of the common shares was $40, the carrying value of the common shares was $20, and the Contributed Surplus—Conversion...
Blossom Inc. has $3 million of 6% convertible bonds outstanding. Each $1,000 bond is convertible into...
Blossom Inc. has $3 million of 6% convertible bonds outstanding. Each $1,000 bond is convertible into 30 no par value common shares. The bonds pay interest on January 31 and July 31. On July 31, 2017, the holders of $780,000 of these bonds exercised the conversion privilege. On that date, the market price of the bonds was 107, the market price of the common shares was $40, the carrying value of the common shares was $20, and the Contributed Surplus...
Finks Co. has $2,500,000 (face value) of 8% convertible bonds outstanding which were issued at a...
Finks Co. has $2,500,000 (face value) of 8% convertible bonds outstanding which were issued at a premium. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on December 31. On December 31, 2020, the holders of 40% of the bonds exercised the conversion privilege. On that date, the market price of the common stock was $36. The total unamortized bond premium at the date of conversion (after the journal entry to...
BUZZ Corp. has a convertible bond issue outstanding. Each bond, with a face value of $1,000,...
BUZZ Corp. has a convertible bond issue outstanding. Each bond, with a face value of $1,000, can be converted into common shares at a rate of 73.2512 shares of stock per $1,000 face value bond (the conversion rate), or $13.651 per share. BUZZ’s common stock is trading (on the NYSE) at $14.90 per share and the bonds are trading at $972. Calculate the conversion value of each bond. Determine if it is currently profitable for bond holders to convert their...
Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of...
Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of $1,000, can be converted into common shares at a rate of 61.2895 shares of stock per $1,000 face value bond (the conversion rate), or $16.316 per share. Hilton’s common stock is trading (on the NYSE) at 15.90 per share and the bonds are trading at $975. a) Calculate the conversion value of each bond. b) Determine if it is currently profitable for bond holders...
Concord Corporation has $4080000 of 7% convertible bonds outstanding. Each $1,000 bond is convertible into 30...
Concord Corporation has $4080000 of 7% convertible bonds outstanding. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2021, the holders of $1220000 bonds exercised the conversion privilege. On that date the market price of the bonds was 106 and the market price of the common stock was $37. The total unamortized bond premium at the date of conversion was $271000. Concord...
Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of...
Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of $1,500, can be converted into common shares at a rate of 61.2992 shares of stock per $1,500 face value bond (the conversion rate), or $24.4701 per share. Hilton’s common stock is trading (on the NYSE) at $24.05 per share and the bonds are trading at $1,475. a. Calculate the conversion value of each bond. (Round your answer to 2 decimal places. (e.g., 32.16)) b....