Exam 16: Financing Liabilities

Under IFRS,a bond's carrying value is the same as reported under U.S.GAAP.

On July 1,2017,Behi Corporation issues $100,000 of 10-year,5% convertible bonds for $125,000.Each bond is convertible into 20 common shares.On the date of the issue,the shares had a market value of $50 per share.What is the correct journal entry to record this issue?

When a company issues bonds,there is typically one debtor and one creditor that transact directly.

A zero-interest-bearing note payable that is issued at a discount will not result in any interest expense being recognized.

When the convertible bonds are issued with a beneficial conversion option,U.S.GAAP typically increases additional paid-in capital and IFRS typically increases other capital reserves.

Jackson Mechanics issues $2,000,000 of bonds with nondetachable stock warrants.For the investors,this means that the bondholders ________.

On July 1,2017,Madrid Plastics issued bonds that included 20 stock warrants for each bond.The warrants were appropriately valued at $4 each at the time the bonds were issued.Each warrant allows the warrant holder to purchase a share of $5 common stock for $30 per share.A holder of 500 warrants decided to exercise all warrants and purchased 500 shares of stock when the market price of the shares was $42.What is the proper journal entry for Madrid to record this transaction?

Given the following information from an amortization table for December 31,prepare the journal entry to record the payment of interest at year end if the fiscal year of the company ends on December 31.

On January 2,2014,Zamarano,Inc.issued 5,000 10-year,6%,$1,000 bonds at par.Interest is paid each December 31.Each bond is convertible into 25 shares of Zamarano $2 Par Value common stock after two years.The market value of the stock on the date of the issue was $45.On January 2,2018,when the carrying value of the bonds was $4,570,363,all of the bondholders converted the bonds to stock.Zamarano reports under GAAP. Required: 1.Prepare the journal entry to record the issuance of the bonds. 2.Recompute the interest rate of the bond issue. 3.Record the first interest payment. 4.Record the conversion of the bonds.

Martin,Inc.is preparing its financial statements for December 31,2016.Martin has a $2,000,000 short-term note that is due in June,2017.Due to an existing long-term line of credit for $1,500,.000,the company will report how much short-term liability?

A beneficial conversion option is an option to convert the debt to equity that is considered to be in the money.

There is a gain on early retirement of bonds if the retirement price is greater than the net carrying value.

Debtors in technical default may be required to reclassify short-term debt as long-term debt unless the creditor waives or loses the right to demand payment.

In U.S.GAAP,Unamortized Bond Issue Costs have a debit balance and are considered ________.

When a company borrows a discounted note for $30,000,it receives less than $30,000 and must repay $30,000.

Which statement below most accurately describes the definition of a current Note Payable?

Nondetachable stock warrants may be sold in the capital markets.

Ripa,Inc.issued $3,000,000 of bonds at par.The bonds contained non-detachable stock warrants.Similar bonds without the warrants were selling at 99.What amount of Paid-in Capital-Stock Warrant will be recorded?

Under U.S.GAAP,bond issue costs are capitalized and amortized over the life of the bonds.

Discuss what causes bonds to sell at par,a premium,or a discount.