On January 1, both Spa Company and Pool Company issued a large amount of convertible debt. Spa Company follows IFRS while Pool Company uses U.S. GAAP for its external financial reporting. Assume this is the only significant way in which Spa and Pool Company differ from each other. Which of the following statements is true regarding this situation?

A. Spa Company will report the entire cash proceeds from the issuance as paid-in capital.

B. Pool Company will allocate a portion of the sales price to the conversion feature by crediting paid-in capital.
C. Spa Company's debt-to-equity ratio will be higher than Pool Company's.

D. Spa Company's debt-to-equity ratio will be lower than Pool Company's

Answer rating: 100% (QA)

Solution The answer is C Spa Companys debttoequity r... View the full answer