Ask Question
6 March, 12:05

On January 1, 2021, Ventrini International issued $10 million of 9%, 10-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Ventrini's no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99. Ventrini applies International Financial Reporting Standards. Upon issuance, Ventrini should Multiple Choice credit bonds payable $9,900,000. credit premium on bonds payable $100,000. credit equity $100,000. credit bonds payable $10,100,000.

+1
Answers (1)
  1. 6 March, 15:17
    0
    credit bonds payable $9,900,000

    Explanation:

    According IFRS the equity and Liability portion of a bond should be recorded separately at the time of bond Issuance. The Liability portion can be calculated current value of the similar non convertible bonds and the difference between the Present value of cash flows and total proceeds from bond is the equity value.

    Current Price of Non convertible bond = 99

    Value of Liability = ($10 / 100) x 99 = 9.9 million or $9,900,000

    Value of Equity = ($10 / 100) x (101 - 99) = 0.2 million or $200,000

    Journal Entry will be as follow

    Dr. Cash $10,100,000

    Cr. Bond Payable $9,900,000

    Cr, Equity $200,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “On January 1, 2021, Ventrini International issued $10 million of 9%, 10-year convertible bonds at 101. The bonds pay interest on June 30 ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers