Christian Brown

2/18/19

Accounting Assignment Ch 15

1.

a) Jan 1, 20X4 Cash 10,200,000

Convertible bonds payable 8,771,087

Contributed capital – common share conversion rights 1,428,913

Issuance of convertible bonds

b) Dec 31, 20X4 Interest Expense (8,771,087 * 10%) 877,109

Convertible bonds payable 77,109

Cash 800,000

First year’s interest expense

2.

a)

Year 1 = 12,000

Year 2 = 12,000

Year 3 = 7500

Year 4 = 10,500

b)

Year 1 = 12,000

Year 2 = 24,000

Year 3 = 31,500

Year 4 = 42,000
3.

a)

Cash 4,235,000

Discount on Bonds Payable 248,400

Bonds Payable 4,000,000

Contributed capital: common share conversion rights 483,400

Issuance of convertible bonds

b)
Year Beginning balance Interest Expense 6% Interest Payment 5% Discount Amortization Discount Ending Balance
1 223,295 3,776,705
2 3,776,705 226,602 200,000 26,602 196,693 3,803,307
3 3,803,307 228,198 200,000 28,198 168,495 3,831,505
4 3,831,504 229,890 200,000 29,890 138,605 3,861,394
5 3,861,394 231,684 200,000 31,684 106,921 3,893,078
6 3,893,078 233,585 200,000 33,585 73,336 3,926,663
7 3,926,663 235,600 200,000 35,600 37,736 3,962,263
8 3,962,263 237,736 200,000 37,736 0 4,000,000

c)

d)

i) June 30, 20X10 Bonds Payable 4,000,000

Contributed Capital: common share conversion rights 483,400

Common Shares 4,483,400

Conversion of bonds to common shares

ii)

Bonds Payable 4,000,000

Cash 4,000,000

Contributed capital: common share conversion rights 483,400

Contributed capital: lapse of rights 483,400

Repayment of bonds with cash