本文发表在 rolia.net 枫下论坛on Jan, 1 04, when its common shares were selling for $80/share, Plato Co. issued $10 million of 8% convertible debentures due in 20yrs. The conversion option allowed the holder of each $1000 bond to convert the bond into 5 common shares. The debentures were issued for $10.8 million. The bond payment's present value at the time of issuance was $8.5 million. and the corporation believes the difference between the present value and the the amount paid is attributable to the conversion feature.

On Jan. 1 2005, the corporation's common shares were spilt 2 for 1, and the conversion rate for the bonds was adjusted accordingly.

On Jan. 1 06, when the Corp. common shares were selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The Corp. uses the straight-line method for amortizing any bond discounts or premiums.

Q:
1. Prep. the general Journal form the entry to record :

a)The original issuance of the convertible debentures?
b)The exercise of the conversion option (book value method)

Based on my understanding, the bond's PV is 8.5 million, and the face value is10 million, non-interest carrying. the market interst rate is 8%. But what's the 10.8 million for?

Any comments? Please help. Thanks alot.更多精彩文章及讨论，请光临枫下论坛 rolia.net