Q3_Convertible bonds (Convertible notes)_Amortised cost_Effective interest methodWoodie Ltd issues $5 million in convertible bonds on 1 July 2019. They are issued at their face valueand pay an interest rate of 4 per cent. The interest is paid at the end of each year. The bonds may beconverted to ordinary shares in Woodie Ltd at any time in the next three years. Organisations similar toWoodie Lid have recently issued similar debt instruments but without the option for conversion toordinary shares. These instruments issued by the other entities offer interest at a rate of 6 per cent. On1 July 2020 all the holders of the convertible notes decide to convert the bonds to shares in Woodie Ltd.Provide the journal entries to:(a) record the issue of the securities on 1 July 2019(b) recognise the interest payment on 30 June 2020, and(c) recognise the conversion of the bonds to ordinary shares on 1 July 2020(d) Prepare extracts to show how the convertible notes and the finance charge shuold be treated byWoodie Ltd in its financial statements for the yeare ended 30 June 2020.Solutions2019-07-01Calculate PV of Liability first (6%, 3 years)V of Principa4,198,000V of Interest per year534,600Total PV of liability$4,732,600Principal$5,000,000Equity component267,4002019-07-01OrCash at bank5,000,000Convertible bonds liability4,732,600Equity component267,400
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more