Answer: The bondholders decided to convert the bonds into common stock because they believed that getting $2250 today is worth more than $120 interest every year and a $1000 principal payment at the end of the bonds life.
Explanation:
1) In order to find out the number of bonds issued we need to divide 750,000 (Total ) by 1000(Face value of each bond).Total number of bonds issues therefore are 750.
2) A 12 percent convertible bond means that the bond pays a coupon of 120 ( 0.12 * 1000) every year.
3) Each bond is convertible into 25 shares , which means if one bond is converted into common stock, the bond holder can earn $1750. We calculate this number by multiplying the number of shares which is 25 into the current market price of the shares which is 70.
4) Also the company is offering an extra $500 per bond for converting it which means (500/25) an extra $20 per share.
5) So in total the bondholder by converting a bond and selling the shares he gets by converting it can earn $2250 per bond which they bought for a $1000 and gives them 120$ of interest every year.
6) SO to conclude the bondholders decided to convert the bonds into common stock because they believed that getting $2250 today is worth more than $120 interest every year and a $1000 principal payment at the end of the bonds life.
I think the answer is false
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Answer:
c.
Explanation:
Secured bonds are bonds that have specific assets of the issuer pledged as collateral. In other words they are a type of bond that is bought by pledging a specific asset, which acts as a collateral on the loan that you are giving the company. Which if the issuer were to default on the payment then the issuer must transfer ownership of the asset to the holder of the secured bond.
Answer:
here correct option is A. $7,000
Explanation:
given data
Stripling earned = $700,000
collected cash = $710,000
company wrote off = $8,000
revenue = 1 %
to find out
net realizable value of receivable
solution
we will find here amount of uncollectible expense that are for year 2
amount of uncollectible expense = Sales revenue for year 2 × revenue %
put here value we wet
amount of uncollectible expense = $700,000 × 1 %
amount of uncollectible expense = $700,000 × 0.01
amount of uncollectible expense = $7,000
so here correct option is A. $7,000