A description of several financial instruments follows: Case A Subordinated 8% debentures payable, interest payable semi-annually,...
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A description of several financial instruments follows: Case A Subordinated 8% debentures payable, interest payable semi-annually, due in the year 20X8. At maturity, the face value of the debentures may be converted, at the company's option, into common shares at the market price at that time. Interest may also be paid in shares using the market value of shares at the interest payment date. Series B shares, nonvoting, annual $1.25 cumulative dividend, convertible at the investor's option into 10 common shares Case B in 20X6. Case C Subordinated 4% debentures payable, interest payable in cash semi-annually, due in 20X9. At maturity, the face value of the debentures must be converted into common shares at a price of $22 per share. Series C shares, nonvoting, annual $1.25 noncumulative dividend, redeemable at the investor's option for $29 per share at Case D any time. Subordinated bonds payable, bearing an interest rate of 5%, interest reset every five years with reference to market rates; Case E principal due to be repaid only on the dissolution of the company, if ever, although may be repaid at the company's option on interest repricing dates. Series B preferred shares, annual $6 cumulative dividend, convertible into four common shares for every $100 preferred share at the investor's option, redeemable at $32 per share at the company's option in 20X10. Case F Required: Classify each financial instrument as debt, equity, or compound (part debt and part equity). Explain your reasoning. A description of several financial instruments follows: Case A Subordinated 8% debentures payable, interest payable semi-annually, due in the year 20X8. At maturity, the face value of the debentures may be converted, at the company's option, into common shares at the market price at that time. Interest may also be paid in shares using the market value of shares at the interest payment date. Series B shares, nonvoting, annual $1.25 cumulative dividend, convertible at the investor's option into 10 common shares Case B in 20X6. Case C Subordinated 4% debentures payable, interest payable in cash semi-annually, due in 20X9. At maturity, the face value of the debentures must be converted into common shares at a price of $22 per share. Series C shares, nonvoting, annual $1.25 noncumulative dividend, redeemable at the investor's option for $29 per share at Case D any time. Subordinated bonds payable, bearing an interest rate of 5%, interest reset every five years with reference to market rates; Case E principal due to be repaid only on the dissolution of the company, if ever, although may be repaid at the company's option on interest repricing dates. Series B preferred shares, annual $6 cumulative dividend, convertible into four common shares for every $100 preferred share at the investor's option, redeemable at $32 per share at the company's option in 20X10. Case F Required: Classify each financial instrument as debt, equity, or compound (part debt and part equity). Explain your reasoning.
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1 Classification of each financial instrument as debt equity or compound part debt and part equity 8 debentures debt Series B shares common shares 4 debentures debt Series C shares common shares Subor... View the full answer
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Auditing a risk based approach to conducting a quality audit
ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg
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