Class16 - Dilutive1

Class16 - Dilutive1 - M351 Notes Class 16 Dilutive...

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M351 Notes, Class 16: Dilutive Securities and EPS, pages 777-792 Today’s topics: What are dilutive securities? What are the journal entries at issuance? At conversion? What are the entries when warrants are issued with other securities? How is value allocated across these securities? Accounting for stock compensation A. At issuance Convertible Bonds are recorded as a straight debt instrument with all of the proceeds in debt accounts. For example, assume that ABC Company issues 2,000 bonds with a face value of $1,000 each at 101. The face interest rate on the bonds is 5% and interest is paid semiannually. Each $1,000 bond is convertible into 50 shares of $8 par value ABC common stock. ABC would make the following entry at issue : Cash (2,000 x $1,000 x 1.01). ............................... 2,020,000 Bonds payable (2,000 x $1,000). ................... 2,000,000 Premium on bonds payable. ........................... 20,000 Bond issue costs would be accounted for and amortized as described in
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Class16 - Dilutive1 - M351 Notes Class 16 Dilutive...

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