Angela AG issues 2,000 convertible bonds at January 1, 2019 The bonds have a 3 year life and are issued at par with a face value of 1,000 per bond, giving total proceeds of 2,000,000 Interest is payable annually at 6 Each bond is convertible into 250 ordinary shares (par value of 1) When the bonds ...

a Present Value of Principal 2000000 X 79383 1587660 Present Value of Interest Payments 1200 ...

Angela AG issues 2,000 convertible bonds at January 1, 2019. The bonds have a 3-year life and

Question:

Angela AG issues 2,000 convertible bonds at January 1, 2019. The bonds have a 3-year life and are issued at par with a of €1,000 per bond, giving total proceeds of €2,000,000. Interest is payable annually at 6%. Each bond is convertible into 250 ordinary shares (par value of €1). When the bonds are issued, the market rate of interest for similar debt without the conversion option is 8%.
Instructions
a. Compute the liability and equity component of the convertible bond on January 1, 2019.
b. Prepare the journal entry to record the issuance of the convertible bond on January 1, 2019.
c. Prepare the journal entry to record the repurchase of the convertible bond for cash at January 1, 2022, its date.
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...