6. What is the accounting for issued convertible bond?.a.The instrument should be recorded solely as bond.b. The instrument should be recorded as either.bond orequity but not both.The instrument should be recorded solely as equity.d. The instrument should be recorded as part bond andpart equity.7. Issued convertible bonds areponente dSeparated into liability and equity components withthe liability component recorded at fair value and theresidual assigned to the equity componentb. Always recorded using the fair value optionc. Recorded at face amount for the liabilityd. Recorded at the par value of shares078. The carrying amount of bonds converted was greater thanthe par value of the ordinary shares issued. Which correctlystates an effect of the conversion?a.Shareholders' equity increasedb. Share premium decreasedC. Retained earnings increasedd. A loss is recognized9. The conversion of bonds payable into ordinary shares iscommonly recorded bya wonda. Incremental methodb. Proportional methodbade arbetsfc. Fair value methodbemod. Book value or carrying amount method10. When convertible bond is not converted but paid atmaturityoga. A gain or loss is recorded for the difference betweenthe carrying amount of the bond and the present valueb. The amount allocated to equity is recorded as a gain.c. The amount allocated to equity is recorded as a loss.d. The carrying amount of the bond equal to face amountis derecognized.

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6. What is the accounting for issued convertible bond?. The instrument should be recorded solely as bond. b. The instrument should be recorded as either.bond or equity but not both. હીં. c. The instrument should be recorded solely as equity. d. The instrument should be recorded as part bond and part equity.

6. What is the accounting for issued convertible bond?. The instrument should be recorded solely as bond. b. The instrument should be recorded as either.bond or equity but not both. હીં. c. The instrument should be recorded solely as equity. d. The instrument should be recorded as part bond and part equity.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which of the following is not a valid statement regarding bonds payable? a. Bonds issued by an entity represent a financial liability and shall be measured at amortized cost using the effective interest method. b. The market price of a bond issue is the present value of its principal amount plus the present value of all future interest payments, both discounted at the market rate of interest when the bonds were issued. c. Bonds that mature at a single date are called term bonds. d. The amortization of a bond premium increases both the recorded interest expense and amortized cost.
Bonds which are collateralized by specific assets in the event the borrowing company defaults on bond payments are called: Select one: a. serial bonds. b. callable bonds. c. unsecured bonds. d. secured bonds. e. convertible bonds.
T or F -Under generally accepted accounting principles, gain or loss must be recognized on the conversion of bonds into equity securities. -A discount on bond payable is charged to interest expense using the effective interest method.
q9. Bond premium should be reported in the statement of financial positionA. along with other premium accounts such as those resulting from stock transactions.B. as deferred credit.C. as a direct addition to the face amount of the bonds.D. as a deduction from the face of the bonds.
1. 2. What is meant by bond issue cost and how do we account for such bond? 3. How do we account for compound financial instruments? 4. What is the difference between convertible bonds and bonds with warrants? 5. What is the difference between the accounting for retirement of ordinary bonds and compound financial instruments?
Under IFRS, convertible bonds: a. are separated into the bond component and the expense component. b. are separated into debt and equity components. c. are separated into their components based on relative fair values. d. All of the above.
q3. For accounting purposes, interest expense recognized on bonds payable should be based on theA. effective interest rate, considering the issue price and the transaction costs.B. nominal interest rate.C. rate stated on the face of the bonds.D. market rate of interest on the reporting date.
. Distinguish between the following values relative to bonds payable: a. Maturity value. b. Face value. c. Market (fair) value. d. Par value.
(Bond Theory: Amortization and Gain or Loss Recognition)Part I: The appropriate method of amortizing a premium or discount on issuance of bonds is the effective-interest method.Instructions(a) What is the effective-interest method of amortization and how is it different from and similar to the straight-line method of amortization?(b) How is amortization computed using the effective-interest method, and why and how do amounts obtained using the effective-interest method differ from amounts computed under the straight-line method?Part II: Gains or losses from the early extinguishment of debt that is refunded can theoretically be accounted for in three ways:1. Amortized over remaining life of old debt.2. Amortized over the life of the new debt issue.3. Recognized in the period of extinguishment.Instructions(a) Develop supporting arguments for each of the three theoretical methods of accounting for gains and losses from the early extinguishment of debt.(b) Which of the methods above is…
2. Characteristics of bonds A. To be effective issuing and investing in bonds, knowledge of their terminology, characteristics, and features is essential. For example: • A bond’s is generally $1,000 and represents the amount borrowed from the bond’s first purchaser. • A bond issuer is said to be in if it does not pay the interest or the principal in accordance with the terms of the indenture agreement or if it violates one or more of the issue’s restrictive covenants. • The contract that describes the terms of a borrowing arrangement between a firm that sells a bond issue and the investors who purchase the bonds is called . • A bond’s gives the issuer the right to call, or redeem, a bond at specific times and under specific conditions. Suppose you read an article about the Golden Gate Bridge and Highway District bonds. It includes the following information: Bridge Bonds Series A Dated 7-15-2005 4.375%…
Which of the following is correct? a. The terms, “yield rate”, “ stated rate”, and “market rate” are generally interchangeable when referring to interest on bonds. b. The yield or effective interest rate on a bond is equal to the stated rate if the bond premium or discount is amortized by using the straight-line method. c. Interest revenue and expense related to bonds are always computed using the stated rate of interest. d. If a bond is sold at its face amount, the stated and effective interest rates are the same.
Which of these items related to bonds would be added back in the Operating section of the SCF under the indirect method? (check all that apply) Amortization of bond discount Loss on bond retirement Gain on bond retirement Unrealized loss on bonds under the fair value option Amortization of bond premium