Hope Insurance decides to finance expansion of its physical facilities by issuing convertible debenture bonds The terms of the bonds follow maturity date 15 years after May 1, 2007, the date of issuance conversion at option of holder after two years 30 shares of $1 par value stock for each $1,000 b...

2007 1 July 1 Cash 1 031 667 Bonds Payable 1 000 000 Premium o ...

Hope Insurance decides to finance expansion of its physical facilities by issuing convertible debenture bonds. The terms of the bonds

Question:

Hope Insurance decides to finance expansion of its physical facilities by issuing convertible debenture bonds. The terms of the bonds follow: date 15 years after May 1, 2007, the date of issuance; conversion at option of holder after two years; 30 shares of $1 stock for each $1,000 bond held; interest rate of 13% and call provision on the bonds of 103. The bonds were sold at 101.
1. Give the entry on Hope’s books to record the sale of $1,000,000 of bonds on July 1, 2007; interest payment dates are May 1 and November 1.
2. Assume the same condition as in (1) except that the sale of the bonds is to be recorded in a manner that will recognize a value related to the conversion feature. The estimated sales price of the bonds without the conversion feature is 97.

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... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...