A15-11 Convertible Debt; Investor Option versus Conversion Mandatory (LO 15-3, 15-4) AMC Ltd. issued five-year, 5%...

A15-11 Convertible Debt; Investor Option versus Conversion Mandatory (LO 15-3, 15-4)

AMC Ltd. issued five-year, 5% bonds for their par value of $900,000 on 1 January 20X1. Interest is paid annually. The bonds are convertible to common shares at a rate of 50 common shares for every $1,000 bond.

(PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)

Required:
1. Assume that the bonds were convertible at the investor’s option and that the conversion option was valued at $73,800.

a. Provide the journal entry on issuance. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Calculate interest expense for each year of the bond’s five-year life. Use an interest rate of 7% for this requirement. (Round your intermediate calculations and final answers to the nearest whole dollar.)

c. Provide the journal entry to record maturity of the bond assuming shareholders convert their bonds to common shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

d. Assume instead that the bonds were repaid for $940,000 after interest was paid in Year 3. Provide the journal entry for retirement, assuming $68,000 of the payment related to the option and the rest related to the bond. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to the nearest whole dollar.)

2. Assume that the bonds were mandatorily convertible at maturity.

a. Calculate the portion of the original proceeds relating to interest and the equity portion. Use a discount rate of 6%. (Round your final answers to the nearest whole dollar. Round time value factor to 5 decimal places.)

b. Provide the journal entry on issuance. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar. Round time value factor to 5 decimal places.)

Expert Solution

ekkarill92 answered 9 months ago

On January 1, 2020, Oriole Ltd. issued 1,040 5-year, 11% convertible bonds at par of $1,000,...

On January 1, 2020, Oriole Ltd. issued 1,040 5-year, 11% convertible bonds at par of $1,000, with interest payable each December 31. Each bond is convertible into 100 common shares, and the current fair value of each common share is $6. Similar straight bonds carry an interest rate of 13%. (a) Calculate the PV of the debt component by itself. Calculate using any of the following methods: (1) factor tables, (2) a financial calculator, or (3) Excel function PV ....

On January 1, 2020, Blossom Ltd. issued 820 5-year, 11% convertible bonds at par of $1,000,...

On January 1, 2020, Blossom Ltd. issued 820 5-year, 11% convertible bonds at par of $1,000, with interest payable each December 31. Each bond is convertible into 100 common shares, and the current fair value of each common share is $6. Similar straight bonds carry an interest rate of 13%. Calculate the PV of the debt component by itself. Calculate using any of the following methods: (1) factor tables, (2) a financial calculator, or (3) Excel function PV. QUESTION: 1)...

Maple Aircraft has issued a 4¾% convertible subordinated debenture due 3 years from now. The conversion...

Maple Aircraft has issued a 4¾% convertible subordinated debenture due 3 years from now. The conversion price is $47.00 and the debenture is callable at 102.75% of face value. The market price of the convertible is 91% of face value, and the price of the common is $41.50. Assume that the value of the bond in the absence of a conversion feature is about 65% of face value. In the absence of the conversion feature, what is the current yield...

Question 3 (5 + 5 + 4 = 14 Marks) a. Match FIVE of the 11...

Question 3 (5 + 5 + 4 = 14 Marks) a. Match FIVE of the 11 audit sampling terms (1-11) with the five definitions provided below in items (i-v): 1. attributes sampling 2. block sample selection 3. haphazard sample selection 4. non-statistical sampling 5. probability proportional to size 6. random selection 7. representative sample 8. sampling distribution 9. statistical sampling 10. stratified sampling 11. systematic sample selection i the use of mathematical measurement techniques to calculate formal statistical results and...

Consider the data. xi 1 2 3 4 5 yi 4 7 5 11 15 The...

Consider the data. xi 1 2 3 4 5 yi 4 7 5 11 15 The estimated regression equation for these data is ŷ = 0.60 + 2.60x. (a)Compute SSE, SST, and SSR using equations SSE = Σ(yi − ŷi)2, SST = Σ(yi − y)2, and SSR = Σ(ŷi − y)2. SSE=SST=SSR= (b) Compute the coefficient of determination r2. r2 = Comment on the goodness of fit. (For purposes of this exercise, consider a proportion large if it is at least...

P15-17 Partnership Formation, Operation, and Changes in Ownership LO 15-3, 15-4, 15-5, 15-6 The partnership of...

P15-17 Partnership Formation, Operation, and Changes in Ownership LO 15-3, 15-4, 15-5, 15-6 The partnership of Jordan and O’Neal began business on January 1, 20X7. Each partner contributed the following assets (the noncash assets are stated at their fair values on January 1, 20X7): Jordan O’Neal Cash $ 61,400 $ 50,900 Inventories 80,200 –0– Land –0– 131,500 Equipment 101,100 –0– The land was subject to a $50,300 mortgage, which the partnership assumed on January 1, 20X7. The equipment was subject...

P10.4A (LO 3, 4), AP On October 1, 2021, Kristal Corp. issued $700,000, 5%, 10-year bonds...

P10.4A (LO 3, 4), AP On October 1, 2021, Kristal Corp. issued $700,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2021, and pay interest annually on October 1. Financial statements are prepared annually on December 31, Instructions a. Prepare the journal entry to record the issuance of the bonds. b. Prepare the adjusting entry to record the accrual of interest on December 31, 2021. c. Show the balance sheet presentation of bonds payable and bond...

On January 1, 2014, Green Company issued 15-year, $50,000,000 face value, 4% convertible preferred stock, at...

On January 1, 2014, Green Company issued 15-year, $50,000,000 face value, 4% convertible preferred stock, at par. Each $1,000 preferred stock is convertible into 20 shares of Green’s common stock. None of the preferred stocks were converted in 2014. Green’s net income in 2014 was $8,680,000, and its tax rate was 30%. The company had 2,650,000 shares of common stock issued and outstanding throughout 2014. Compute diluted earnings per share for 2014.

CASE 11‐2 Debt Restructuring Whiley Company issued a $100,000, five‐year, 10 percent note to Security Company...

CASE 11‐2 Debt Restructuring Whiley Company issued a $100,000, five‐year, 10 percent note to Security Company on January 2, 2016. Interest was to be paid annually each December 31. The stated rate of interest reflected the market rate of interest on similar notes. Whiley made the first interest payment on December 31, 2016. Owing to financial difficulties, the firm was unable to pay any interest on December 31, 2017. Security Co. agreed to the following terms: The $100,000 principal would...

3 6 4 8 1 10 2 9 11 12 15 22 3 6 7 5...

3 6 4 8 1 10 2 9 11 12 15 22 3 6 7 5 8 1 12 14 Each column represents a different treatment given to sick rats. Each cell is a different rat. Use statistical analysis and use post hoc testing using contrasts to find the best treatment. Treatment 1: vitamins Treatment 2: prescription pills Treatment 3: brain surgery Treatment 4: shock therapy Treatment 5: dietary changes

Question