chap 16 class ec

chap 16 class ec - Chapter 16 Class Examples Convertible...

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Chapter 16 Class Examples Convertible Bonds Harvey, Inc. issued $1,000,000 of seven-year 5.25% convertible bonds ($1,000 each) on July 1, 2004. The bonds were sold at 98.87 and each bond is convertible into 10 shares of Harvey's $1 par common stock, which was trading for $76 / share at the time. Without the conversion option, the bonds would have sold for 94.875. On November 1, 2006, all of the 1,000 bonds are exchanged for or converted into a total of 10,000 shares. At the time of conversion, the bonds were trading for 99.5 while Harvey's common stock was selling for $110 / share. In addition, the unamortized discount on the bonds was $9,675. What is the appropriate entry to record the issuance of the bonds? What is the appropriate entry to record the conversion of the bonds? Bonds w/ Detachable Stock Warrants Farris, Inc. issued 1,000 bonds ($1,000 par each) with warrants attached for 101. Each bond has 5 detachable warrants attached and each warrant gives the holder the right to purchase one share of common stock ($1 par) for $50. It is estimated that the bonds would sell for 98 without the warrants and
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chap 16 class ec - Chapter 16 Class Examples Convertible...

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