CH 16 Class Notes - Part 1 - CHAPTER 16 DILUTIVE SECURITIES...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 16 – DILUTIVE SECURITIES I. Dilutive Securities A. Convertible Bonds 1. Can be exchanged for shares of stock at the option of the investor. 2. 3. Advantages of Convertible Bonds 4. At Issuance: Normal Entry 5. At Conversion: a. b. c. d. e. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
CONVERTIBLE BONDS On January 1, 2008, HTL Manufacturers issued $100 million of 8% convertible debentures due 2018 at 103 (103% of face value). The bonds are convertible at the option of the holder into $1 par common stock at a conversion ratio of 40 shares per $1,000 bond. At Issuance ($ in Millions) Cash (103% x $100 million). .................................. 103 Convertible bonds payable (face value). ............ 100 Premium on bonds payable (difference). ........... 3 Assume that ½ of the convertible bonds are converted at a time when the remaining unamortized premium is $2 million. At Conversion ($ in Millions) Convertible bonds payable (1/2 the account balance) 50 Premium on bonds payable (1/2 the account balance) 1 Common stock [(50,000 bonds x 40 shares) x $1 PV] 2 Paid-in capital – excess of par (to balance). ....... 49 2
Background image of page 2
B. Bonds with Detachable Warrants 1. A stock warrant gives the investor an option to purchase a stated number of shares of common stock at a specified option price within a specified time period. 2. Proportional Method: 3. At Issuance: 4. At Exercise: 3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
BONDS WITH DETACHABLE WARRANTS On January 1, 2008, HTL Manufacturers issued $100 million of 8% debentures due 2018 at 103 (103% of face value). Accompanying each bond were 20 warrants. Each warrant permitted the holder to buy one share of $1 par common stock at $25 per share. Shortly after issuance,
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/26/2009 for the course ACCT AIM 4332 taught by Professor Tiffanybortz during the Summer '09 term at University of Texas at Dallas, Richardson.

Page1 / 11

CH 16 Class Notes - Part 1 - CHAPTER 16 DILUTIVE SECURITIES...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online