Chapter 14 Day 3-2 - Exercise 14–28 Requirement 1($ in...

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Brief Exercise 14–14 GAAP requires that the entire issue price of convertible bonds be recorded as debt, precisely the same way, in fact, as for nonconvertible bonds. ($ in millions) Cash (102% x $60 million) ...................................................... 61.2 Premium on bonds payable (difference) ............................ 1.2 Bonds payable (face amount) ............................................. 60.0
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Exercise 14–26 Requirement 1 Cash (given) ............................................................... 40,800,000 Convertible bonds payable (face amount) ............... 40,000,000 Premium on bonds payable (to balance) ................. 800,000 Requirement 2 Interest expense ($1,200,000 – 40,000) ............................. 1,160,000 Premium on bonds payable ($800,000 ÷ 20) ............... 40,000 Cash (3% x $40,000,000) .......................................... 1,200,000 Requirement 3 Interest expense ($1,200,000 – 40,000) ............................. 1,160,000 Premium on bonds payable ($800,000 ÷ 20) ............... 40,000 Cash (3% x $40,000,000) .......................................... 1,200,000 Convertible bonds payable (account balance) .............. 40,000,000 Premium on bonds payable ($800,000 – [$40,000 x 5]) 600,000 Common stock (to balance) .................................... 40,600,000
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Exercise 14–28
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Unformatted text preview: Exercise 14–28 Requirement 1 ($ in millions) Limbaugh (Issuer) Cash (104% x $30 million). ..................................................... 31.2 Discount on bonds payable (difference). ............................... 3.6 Bonds payable (face amount). ............................................ 30.0 Equity—stock warrants ($8 x 20 warrants x [$30,000,000 ÷ $1,000] bonds) ............... 4.8 Interstate (Investor) Investment in stock warrants ($4.8 million x 20%). ............... 0.96 Investment in bonds (20% x $30 million). .............................. 6.00 Discount on bond investment (difference). ....................... 0.72 Cash (104% x $30 million x 20%). ....................................... 6.24 Requirement 2 ($ in millions) Limbaugh (Issuer) Cash (20% x 30,000 bonds x 20 warrants x $60). ........................ 7.20 Equity—stock warrants ($4.8 million x 20%). ....................... 0.96 Common stock (to balance). .............................................. 8.16 Interstate (Investor) Investment in common stock (to balance). ........................... 8.16 Investment in stock warrants ($4.8 million x 20%). ............ .96 Cash (20% x 30,000 x 20 warrants x $60). ............................. 7.20...
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