On January 1, 2020, Wildhorse Ltd. issued 870 5-year, 10% 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 12%.
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=_________
How should Wildhorse record the issuance if it follows IFRS? Use the amount you arrived at in part (a) using a financial calculator or Excel
Date |
Account Titles and Explanation |
Debit |
Credit |
---|---|---|---|
January 1 |
Cash |
enter a debit amount |
enter a credit amount |
Bond Payable |
enter a debit amount |
enter a credit amount |
|
Contributed Surplus- Conversion Rights |
enter a debit amount |
enter a credit amount |
Assuming it to be an optionally convertible bond | |||||
Cashflows | PV Amount | ||||
1 | $87,000 | $77,679 | 87000/(1.12)^1 | ||
2 | $87,000 | $69,356 | 87000/(1.12)^2 | ||
3 | $87,000 | $61,925 | 87000/(1.12)^3 | ||
4 | $87,000 | $55,290 | 87000/(1.12)^4 | ||
5 | $957,000 | $543,028 | 957000/(1.12)^5 | ||
PV of bond | $807,277 | ||||
Date | Account Titles and Explanation | Debit | Credit | ||
01-Jan | Cash | 870000 | |||
Bond Payable | $807,277 | ||||
Contributed Surplus- Conversion Rights | $62,723 | ||||
Assuming it to be an compulsory convertible bond | |||||
1 | $87,000 | $77,679 | 87000/(1.12)^1 | ||
2 | $87,000 | $69,356 | 87000/(1.12)^2 | ||
3 | $87,000 | $61,925 | 87000/(1.12)^3 | ||
4 | $87,000 | $55,290 | 87000/(1.12)^4 | ||
5 | $87,000 | $49,366 | 87000/(1.12)^5 | ||
$313,616 | |||||
Date | Account Titles and Explanation | Debit | Credit | ||
01-Jan | Cash | 870000 | |||
Bond Payable | $313,616 | ||||
Contributed Surplus- Conversion Rights | $556,384 |
On January 1, 2020, Wildhorse Ltd. issued 870 5-year, 10% convertible bonds at par of $1,000,...
On January 1, 2020, Wildhorse Ltd. issued 870 5-year, 10% 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 12%. 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. (For calculation...
On January 1, 2020, Sheridan Ltd. issued 980 5-year, 10% 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 12%. QUESTION: 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....
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