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Wagagoostui Corporation has 300,000 common shares outstanding on Janu- ary 1, 2017, when it issues convertible...

Wagagoostui Corporation has 300,000 common shares outstanding on Janu- ary 1, 2017, when it issues convertible bonds. The debt issue is composed of 1,000 bonds at $1,000 face value with a 20-year term and a 10% coupon rate. Each bond is sold at 101 and is convertible into 20 common shares. Wagagoostui incurs costs of $80,000 related to the issue. An underwriter advises Wagagoostui that the bonds would likely have sold for 99 without the conversion feature. The straight-line method is used to amortize any premium or discount, as well as bond issue costs. Wagagoostui prepares financial statements in accordance with ASPE.

Instructions

a) Record issuance of the convertible bonds on January 1, 2017, using the book value method.  Reflect on why ASPE would elect to use the residual method even though they can elect the book value method.

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ekkarill92 answered 1 year ago
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