Balatbat Ltd issued $20 million of convertible notes on 1 July 2006. The notes have a life of 6 years and a face value of $20 each. Annual interest…

Balatbat Ltd issued $20 million of convertible notes on 1 July 2006. The notes have a life of 6 years and a face value of $20 each. Annual interest of 5 per cent is payable at the end of each year. The notes were issued at their face value and can be converted at any time over their lives. Organisations with a similar risk profile to Balatbat Ltd have issued debt with similar terms but without the option to convert at the rate of 7 per cent. What are the appropriate accounting entries to record the issue of the convertible notes and the first payment of interest in accordance with relevant accounting standards?

Answer:

(b) 1 July 2006

Dr Cash at bank 20 000 000

Cr Convertible notes liability 18 092 500

Cr Equity (Option to convert notes) 1 907 500

30 June 2007

Dr Interest expense 1 266 475

Cr Cash at bank 1 000 000

Cr Convertible notes liability 266 475

HI How can I get these numbers

Present value of principalPresent value of interestTotal 13326844476654018093384 Explanation:The credit to notes is computed by computing the present value of the principal and interst using…

Order the answer to view it

Place this order or similar order and get an amazing discount. USE Discount code “GET20” for 20% discount

 

Posted in Uncategorized