Parrot Ltd issues $7 million in convertible bonds on 1 July 2023. They are issued at their
Question:
Parrot Ltd issues $7 million in convertible bonds on 1 July 2023. They are issued at their face value and pay an interest rate of 7 per cent. The interest is paid at the end of each year. The bonds may be converted to ordinary shares in Parrot Ltd at any time in the next 3 years. Organisations similar to Parrot Ltd have recently issued similar debt instruments but without the option for conversion to ordinary shares. These instruments issued by the other entities offer interest at a rate of 8 per cent.
On 1 July 2024, all the holders of the convertible notes decide to convert the bonds to shares in Parrot Ltd.
REQUIRED:
- Record the issue of the securities on 1 July 2023 (1 Mark)
- Recognise the interest payment on 30 June 2024 (1 Mark)
- Recognise the conversion of the bonds to ordinary shares on 1 July 2024 (1 Mark).
Appendix A
Present value of $1 in n periods
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Appendix B Present value of an annuity of $1 per period for n periods
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Expert Answer:
Solution 1 Record the issue of the securities on 1 July 2023 The convertible bonds are issued at the... View the full answer
Accounting Principles
ISBN: 9781119707110
14th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Jill E. Mitchell
