On Jan 01, 2020, ACME Incorporated issued $10 million of 6% convertible bonds at 100, which...

 

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On Jan 01, 2020, ACME Incorporated issued $10 million of 6% convertible bonds at 100, which are due on December 31, 2029. The bonds pay interest annually on December 31. Each $1,000 bond can be converted to 20 common shares at the discretion of the bondholder at any interest payment date. Similar bonds without the conversion feature are trading in the market at 8%. Assume that ACME follows ASPE. Required: Round interim calculations to four decimals and final answers to the nearest dollar. Show calculations to support your answers. 1. Prepare the journal entry for the issuance of the bonds. (6 marks) 2. Prepare the journal entry to record the conversion of 40% of the bonds on December 31, 2025. The carrying value after the interest payment was $9,201,458. (3 marks) 3. Prepare the journal entry to retire the bonds at maturity assuming that no other conversions took place. (3 marks) 4. What are the requirements if ACME followed IFRS? (3 marks) On Jan 01, 2020, ACME Incorporated issued $10 million of 6% convertible bonds at 100, which are due on December 31, 2029. The bonds pay interest annually on December 31. Each $1,000 bond can be converted to 20 common shares at the discretion of the bondholder at any interest payment date. Similar bonds without the conversion feature are trading in the market at 8%. Assume that ACME follows ASPE. Required: Round interim calculations to four decimals and final answers to the nearest dollar. Show calculations to support your answers. 1. Prepare the journal entry for the issuance of the bonds. (6 marks) 2. Prepare the journal entry to record the conversion of 40% of the bonds on December 31, 2025. The carrying value after the interest payment was $9,201,458. (3 marks) 3. Prepare the journal entry to retire the bonds at maturity assuming that no other conversions took place. (3 marks) 4. What are the requirements if ACME followed IFRS? (3 marks)

Answer rating: 100% (QA)

Solution 1 Cash Outflow Date Statement Showing Value of Liabilities Cash Flow Interest Se... View the full answer