Norman Co , a fast growing golf equipment company, uses GAAP It is considering the issuance of convertible bonds The bonds mature in 10 years, have a face value of $400,000, and pay interest annually at a rate of 4 The estimated fair value of the equity portion of the bond issue is $35,000 Greg Sha...

a Norman makes the following entry to record the issuance unde ...

Norman Co., a fast-growing golf equipment company, uses GAAP. It is considering the issuance of convertible bonds.

Question:

Norman Co., a fast-growing golf equipment company, uses GAAP. It is considering the issuance of convertible bonds. The bonds mature in 10 years, have a of $400,000, and pay interest annually at a rate of 4%. The estimated fair value of the equity portion of the bond issue is $35,000. Greg Shark is curious as to the difference in accounting for these bonds if the company were to use IFRS.
(a) Prepare the entry to record issuance of the bonds at par under GAAP.
(b) Repeat the requirement for part (a), assuming application of IFRS to the bond issuance.
(c) Which approach provides the better accounting? Explain.

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...