On January 1, 2011, Lin Company issued a convertible bond with a par value of $100,000...

On January 1, 2011, Lin Company issued a convertible bond with a par value of $100,000 in the market for $120,000. The bonds are convertible into 12,000 ordinary shares of $1 per share par value. The bond has a 5-year life and has a stated interest rate of 10% payable annually. The market interest rate for a similar non-convertible bond at January 1, 2011, is 8%.
Required:
a. Compute the liability component of the convertible bond on January 1, 2011
b. Prepare the accounting entry to record the issuance of the convertible bond on January 1, 2011
c. Prepare the accounting entry to record the payment of interest on December 31, 2012
d. Assume that the bonds were converted on December 31, 2013. The fair value of the liability component of the bond is determined to be $108,000 on December 31, 2013. Prepare the entry to record the conversion on December 31, 2013. Assume the accrual of interest related to 2013 has been recorded

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ekkarill92 answered 1 year ago

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