On January 1, 2021, MANGO Corp. issues $100 million of convertible bonds at par value. The bonds have a stated annual interest rate of 6%, pay interest semiannually, and come due December 31, 2025. The bonds are convertible at any time after issuance at the rate of 25 shares of common stock for each $1,000 of the face value of the convertible bonds. Issuance costs total $500,000. The current annual market interest rate for non-convertible bonds with similar maturity is 8%. Required: 1 - Prepare the journal entries to record the issuance of the convertible bonds (round to the nearest dollar). 2 - Determine the amount of expense related to the convertible bonds that the company should recognize each year ( round to the nearest dollar) and prepare the journal entries for the first year only.
On January 1, 2021, MANGO Corp. issues $100 million of convertible bonds at par value. The bonds have a stated annual interest rate of 6%, pay interest semiannually, and come due December 31, 2025. The bonds are convertible at any time after issuance at the rate of 25 shares of common stock for each $1,000 of the face value of the convertible bonds. Issuance costs total $500,000. The current annual market interest rate for non-convertible bonds with similar maturity is 8%. Required: 1 - Prepare the journal entries to record the issuance of the convertible bonds (round to the nearest dollar). 2 - Determine the amount of expense related to the convertible bonds that the company should recognize each year ( round to the nearest dollar) and prepare the journal entries for the first year only.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 7C
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