Compound Financial Instrument Example # 2 Convertible bond Company A issues 5,000 convertible bonds with a
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Compound Financial Instrument
Example # 2 – Convertible bond
Company A issues 5,000 convertible bonds with a face value of $ 5,000,000 for $ 4,850,000 on Jan 1, 2021
5% interest paid semi-annually, principal matures in 5 years
Each bond can be converted into 200 common shares at any time
Comparable bonds with no conversion feature have interest rate of 8%
What are the entries for 2021 assuming no bonds were converted?
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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