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jasenka [17]
3 years ago
8

Hrustic Company issued $750,000 of 12% convertible bonds at face value on an interest payment date several years ago. The face v

alue of each bond is $1,000, and each bond is convertible into 25 shares of $1 par common stock. Hrustic has embarked on a program of debt reduction; U.S. interest rates have declined during the term of the convertible bonds. Consequently, Hrustic offers the convertible bondholders $500 cash per bond as an inducement to convert. The market price of Hrustic stock is currently $70 per share. The bonds must be converted within a three-month period to receive the cash inducement. The bondholders accept the inducement and convert within the required period. Required:Explain why the bondholders decided to convert their bonds into shares of common stock.Record the conversion using the book value method.
Business
1 answer:
mina [271]3 years ago
5 0

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.

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The Stibbe Construction Company switched from the completed contract method to the percentage-of-completion method of accounting
Svetllana [295]

Answer:

The correct answer is A

Explanation:

Change in accounting principle is the term which is defined as when the business choose among the GAAP (generally accepted accounting principles) or changes the method with which the principle is used. These principles impact the way or the method used, and then estimates the particular recalculation.

For example, company using the different method of depreciation after the 1st year of operations pr switching among FIFO to LIFO methods of inventory valuation.

So, in this case, the company switch or change the completed contract method to the percentage of completion accounting method. Therefore, the company uses the change in the accounting principle.

6 0
3 years ago
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Listed below are amounts of court income and salaries paid to the town justices. All amounts are in thousands of dollars. Constr
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Answer:

H0 : β = 0

H1 : β = 0

R = 0.8642

P value = 0.002654

Explanation:

Null hypothesis : H0 : β = 0

Alternative hypothesis : H1 : β ≠ 0

The correlation Coefficient, R value as obtained using a correlation Coefficient calculator is 0.8642. This depicts that a strong positive relationship exists between court income and Justice salary.

The Pvalue using the Pvalue calculator (R = 0.8642, N = 9) = 0.002654

The Pvalue < α

0.002654< 0.05 ; Hence, we reject H0.

4 0
3 years ago
Which of the following statements is false? a. Another common use of private constructors is to force client code to use so-call
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Answer:

Option D is false

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You can prevent client codes from creating objects of a class by providing a single private constructor that consists entirely of static fields and methods for example

public class Validation

{private Validation() {} // prevents instances // static methods and fields go here}

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4 years ago
An analyst wants to estimate the yield to maturity on a non-traded 4-year, annual pay bond rated A. Among actively traded bonds
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Answer:

3.8%

Explanation:

3 year bonds yielding 3.2%

6 year bonds yielding 5.0

Annual pay bond 4 years

Yielding bond+[(Annual pay bond- Bonds years)/bond years]×(Yielding bond-Yeilding bonds)

Let plug in the formula

Interpolating: 3.2% + [(4 - 3) / (6 - 3)] × (5.0% - 3.2%)

=3.2%+[1/3×(1.8%)]

= 3.2%+(0.33333×1.8%)

=3.2%+0.006

=0.032+0.006

=0.038×100

=3.8%

Alternatively,

Interpolating: 3.2% + [(4 - 3) / (6 - 3)] × (5.0% - 3.2%) =3.8%

In this case the analyst should estimate a YTM for the non-traded bond that is closest to: 3.8%

8 0
4 years ago
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<h3><u>Answer;</u></h3>

B. both total assets and total liabilities and owner’s equity.

<h3><u>Explanation;</u> </h3>

A double-ruled line should be drawn under the amount for both total assets and total liabilities and owner’s equity.

A single ruled line should be drawn on the column line above the amount for total assets, total liabilities and total liabilities and owner' equity.

For a given date, the Balance sheet shows the; total assets, total liabilities and owner's equities. That is, the Balance sheet shows end-of-period balances in the firm's Assets, Liabilities, and Owners Equity accounts

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