Question

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

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.