On January 1, 2017, when the fair value of its common shares was $80 per share, Hammond
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(a) Prepare the entry to record the original issuance of the convertible debentures.
(b) Using the book value method, prepare the entry to record the exercise of the conversion option. Show supporting calculations in good form.
(c) How many shares were issued as a result of the conversion?
(d) From the perspective of Hammond Corp., what are the advantages and disadvantages of the conversion of the bonds into common shares?
(e) Assume, instead, that Hammond Corp. decides to retire the bonds early, on January 1, 2019, by paying cash of $3,306,000 to the bondholders. On that date, the fair value of a similar bond without the conversion feature is $870 per bond. Prepare the journal entry using the book value method.
Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
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