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Feliz [49]
2 years ago
5

Splish Corporation has outstanding 2,200 $1,000 bonds, each convertible into 50 shares of $10 par value common stock. The bonds

are converted on December 31, 2020, when the unamortized discount is $21,200 and the market price of the stock is $21 per share.
Record the conversion using the book value approach.
Business
1 answer:
Nimfa-mama [501]2 years ago
6 0

Answer:

The book value method is a technique for recording the conversion of a bond into stock. In essence, the book value at which the bonds were recorded on the books of the issuer is shifted to the applicable stock account. Here, the journal entry for Splish Corporation of the conversion of the bonds would be,

Account Title                                                              Debit        Credit

Bonds Payable (2,200 bonds x $1000).................2,200,000

Discount on Bonds Payable...............................................................21,200

Common Stock (50 shares x $10 x 2200 bonds).......................1,100,000

Paid in Cash in excess of Par

- Common Stock.................................................................................1,078,800

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Andrews [41]

Answer:

Regina: Final amount=$62,769

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Explanation:

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Compound quarterly means that each quarter of the year ( every three months) she will receive a 10% interest rate of her deposit. To convert this periodic rate to an annual rate( because the problem ask you about years) you use this formula :

Annual rate= ((1+Periodic rate)^(# periods))-1

In this case the number of periods means the number of quarters a year have, which is 4

Annual rate= ((1+10%)^(4))-1= 46.41%

To find the final amount Regina has after 3 year we use this formula:

Final Capital (FC)= Initial Capital (IC)*[(1+interest(i))]^(number of periods(n))

FC= $20,000*[(1+46.41%)^3]

FC=$62,769 I attached an excel figure which shows a more detailed data.

Will Smith

Semiannually means that every 6 months Will Smith will receive a 12% interest rate of the initial investment. To convert this periodic rate to an annual rate you use the same above formula:

Annual rate= ((1+Periodic rate)^(# periods))-1

In each year Will will receive twice the interest rate over the initial investment

Annual rate = ((1+12%)^(2))-1

Annual rate= 25.44%

The present value of $80,000 from now to 5 years is calculated using the formula attached, but I used Excel. First you have to copy all the cash flows of the 5 years. Then, you set the interest rate that in this case is the one that you found above( 25.44%). Finally you use the financial formula "NPV" in this way:

"=NPV(25.44%;C4:C8)" I used C4:C8 because in those excel cells i copied the cash flows.

I got that the present value of this amount is $213,216

5 0
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Answer:

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