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Convertible bonds

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Convertible bonds

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • October 23, 2021 at 6:50 pm #638936
    Nikitagarwal
    Participant
    • Topics: 154
    • Replies: 147
    • ☆☆☆

    Hi,
    Ques – An entity issues 2% convertible bonds at their nominal value of
    $36,000. Interest is payable annually in arrears.
    The bonds are convertible at any time up to maturity into 40 ordinary
    shares for each $100 of bond. Alternatively the bonds will be
    redeemed at par after 3 years.
    Similar non-convertible bonds would carry an interest rate of 9.1%.
    The present value of $1 payable at the end of year, based on rates
    of 2% and 9.1% are as follows:
    End of year 2% 9.1%
    1 0.98 0.92
    2 0.96 0.84
    3 0.94 0.77
    What amounts will be shown as a financial liability and as
    equity when the convertible bonds are issued?
    What amounts will be shown in the statement of profit or loss
    and statement of financial position for years 1–3?

    My question – Can you please explain why 36k was booked under Current liabilities here? because technically there is no where mentioned that it will be converted within an year ?

    October 30, 2021 at 9:32 am #639446
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7171
    • ☆☆☆☆☆

    What year is it that they are showing the 36k as a current liability?

  • Author
    Posts
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