Nama : Erika Christina

NIM : 2501987021
Kelas : LD53
 Brief exercises
15.1 Kaymer SA issued 300 shares of €10 par value ordinary shares for €4,500.
Prepare Kaymer’s journal entry.
answer :
Particular Debit Credit
Cash 4,500
Share capital - ordinary 3,000
Share premium - ordinary 1,500

15.2 Swarten AG issued 600 shares of no-par ordinary shares for €8,200.
Prepare Swarten’s journal entry if (a) the shares have no stated value,
and (b) the shares have a stated value of €2 per share.
answer :
(a) Particular Debit Credit
Cash 8,200
Share Capital - Ordinary 8,200
(being share issued at no stated value)

(b) Particular Debit Credit

Cash 8,200
Share Capital - Ordinary (600*2) 1,200
Share Premium - Ordinary 7,000
(being share issued at stated value)

15.3 Wilco SE has the following equity balances at December 31, 2022.

Share capital-ordinary, 5 par value 510,000

Treasury shares 90,000
Retained earnings 2,340,000
Share premium-ordinary 1,320,000

Prepare Wilco’s December 31, 2022, equity section in the statement of financial position.
answer :
Wilco SE
Stockholder's equity
December 31, 2022
Common stock, 5 par value 510,000
Paid in capital in excess of par common stock 1,320,000
Total paid in capital 1,830,000
Retained earnings 2,340,000
4,170,000
Less : Treasury stock 90,000
Total stockholder's equity 4,080,000
 15.4 Ravonette Corporation issued 300 shares of $10 par
value ordinary shares and 100 shares of $50 par value preference
shares for a lump sum of $13,500. The ordinary shares have a market
price of $20 per share, and the preference shares have a market price
of $90 per share. Prepare the journal entry to record the issuance.
answer :
Particular Debit Credit
Cash 13,500
Share capital - preference 5,000
Share premium - preference 3,100
Share capital - ordinary 3,000
Share premium - ordinary 2,400

Allocation Ordinary share Preference share

Issued price 13,500 13,500
Allocation % 40% 60%
Total 5,400 8,100

calculation :
share capital - preference = preference share x par value
= 100 x 50
= 5,000

share capital - ordinary = ordinary shares x par value

= 300 x 10
= 3,000

15.5 On February 1, 2022, Gruber plc issued 3,000 shares

of its £5 par value ordinary shares for land worth £31,000. Prepare the
February 1, 2022, journal entry.
answer :
Particular Debit Credit
Land 31,000
Share capital - ordinary 15,000
Share premium - ordinary 16,000
 16.1 Angela AG issues 2,000 convertible bonds at January 1, 2022.
The bonds have a 3-year life and are issued at par with a face value of
€1,000 per bond, giving total proceeds of €2,000,000. Interest is
payable annually at 6%. Each bond is convertible into 250 ordinary
shares (par value of €1). When the bonds are issued, the market rate of
interest for similar debt without the conversion option is 8%.

Instructions
a. Compute the liability and equity component of the convertible
bond on January 1, 2022.
answer :
Convertible bonds 2,000
Year life 3
Face value per bond 1,000
Total proceeds 2,000,000
Interest 6%
Convertible bonds 250 ordinary share
Par value 1
Market rate 8%

PV Table 6.2, n=3, I=8% 0.79383

PVF-OA, n=3, I=8% 2.5771

Present value of principal 1,587,660

Present value of interest payment 309,252
Present value of liability component 1,896,912

Fair value of convertible debt 2,000,000

Less : Present value of liability component 1,896,912
Present value of equity component 103,088

b. Prepare the journal entry to record the issuance of the convertible

bond on January 1, 2022.
answer :
Particular Debit Credit
Cash 2,000,000
Bond payable 1,896,912
Share premium - conversion equity 103,088

c. Prepare the journal entry to record the repurchase of the

convertible bond for cash at January 1, 2025, its maturity date.
answer :
Particular Debit Credit
Bonds payable 2,000,000
Cash 2,000,000
 16.2 Assume the same information in E16.1, except that Angela AG
converts its convertible bonds on January 1, 2023.

Instructions
a. Compute the carrying value of the bond payable on January 1, 2023.
answer :
Carrying value of bonds 1,896,912
Discount amortized in 2023 31,753
Carrying value of bonds 1,928,665

b. Prepare the journal entry to record the conversion on January 1, 2023

answer :
Particular Debit Credit
Share premium - conversion equity 103,088
Bonds payable 1,928,665
Share capital - ordinary 500,000
Share premium - ordinary 1,531,753

c. Assume that the bonds were repurchased on January 1, 2023, for

€1,940,000 cash instead of being converted. The net present value
of the liability component of the convertible bonds on January 1,
2023, is €1,900,000. Prepare the journal entry to record the
repurchase on January 1, 2023.
answer :
Particular Debit Credit
Share premium - conversion equity 40,000
Bonds payable 1,928,665
Cash 1,940,000
Gain on repurchase 28,665
 16.3 On January 1, 2022, Cai Ltd. issued a 10% convertible bond at
par, with a face value of ¥100,000, maturing on January 1, 2032
(amounts in thousands). The bond is convertible into ordinary shares
of Cai at a conversion price of ¥2,500 per share. Interest is payable
annually. At date of issue, Cai could have issued at par non-convertible
debt with a 10-year term bearing an interest rate of 11%.

Instructions
a. Prepare the journal entry to record the issuance of the convertible
debt on January 1, 2022.
answer :
Face value 100,000
Interest 10%
Conversion price 2,500
Marekt value 11%
Interest value 10,000
Period 10%

PVF, n=10; i=11% 0.35218

PVF-OA, n=10; i=11% 5.88923

Present Value of Principal 35,218

Present Value of Interest 58,892
Present Value of Liability Component 94,110
Equity Component 5,890

Particular Debit Credit

Cash 100,000
Bonds payable 94,110
Share premium - conversion equity 5,890

b. On January 1, 2025, Cai makes a tender offer to the holder of the

convertible debt to repurchase the bond for ¥112,000, which the
holder accepts. At the date of repurchase, Cai could have issued
non-convertible debt with a 7-year term at an effective-interest
rate of 8%. Prepare the journal entry to record this repurchase on January 1, 2025
answer :
Date Cash Paid Interest Expense
1/1/2022
1/1/2023 10,000 10,352
1/1/2024 10,000 10,391
1/1/2025 10,000 10,434

Computation of gain or loss on liability component :

Present Value of Principal (n=7, i=8%) 58,349
Present Value of Interest (n=7, i=8%) 52,064
Present Value of Liability Component 110,413
Less: Carrying Value 95,287
Loss 15,126

Adjustment to equity :
Fair value of convertible bonds 112,000
Less : liability component 110,413
Adjustment to share premium-conversion equity 1,587

Particular Debit Credit

Share premium-conversion equity 1,587
Bonds payable 95,287
Loss on repurchase 15,126
Cash 112,000
Bond Amortization Carrying Value
94,110
352 94,462
391 94,853
434 95,287
 17.1

answer :
Date Particulars Debit Credit
a. December 31, 2019 Debt Investment 108,660

Cash 108,660
(being entry for the purchase of bond)
b. December 31, 2020 Cash 7,000
Interest revenue 5,433
Debt Investment 1,567
(being entry of interest revenue)
c. December 31, 2022 Cash 7,000
Interest revenue 5,272
Debt Investment 1,728
(being entry of interest revenue)
d. December 31, 2019 Debt Investment 108,660
Cash 108,660
(being entry for the purchase of bond)
e. December 31, 2020 Cash 7,000
Interest revenue 5,433
Debt Investment 1,567
(being entry of interest revenue)
December 31, 2020 Unrealized holding gain or loss 593
Fair value adjustment 593
(being entry for fair value adjustment)
f. December 31, 2022 Cash 7,000
Interest revenue 5,272
 Debt Investment 1,728
(being entry fo interest revenue)
December 31, 2022 Unrealized holding gain or loss 122
Fair value adjustment 122
(being entry for fair value adjustment)
 17.2

answer :
a. Particulars Debit
Debt Investment € 369,114
Cash

Cash Received
Date
8%
b.
January 1, 2022
January 7, 2022 € 16,000
December 31, 2022 € 16,000
January 7, 2023 € 16,000
December 31, 2023 € 16,000
January 7, 2024 € 16,000
December 31, 2024 € 16,000
January 7, 2025 € 16,000
December 31, 2025 € 16,000
January 7, 2026 € 16,000
December 31, 2026 € 16,000
Total € 160,000

c. Date Account Tittle

1/7/2022 Cash
Debt Investment
Interest Revenue
31/12/2022 Debt Investment
Interest Receivable
Interest Revenue
d. 12/31/2023 Cash
 Gain or Loss on Sale of Debt Inve
Debt Investment
e. 1/12/2022 Unrealized Holding Gain or Loss
Fair Value Adjustment
 Credit

€ 369,114

Carrying
Interest Bond Discount
Amount of
Revenue 10% Amortization
Bonds

€ 369,114
€ 18,456 € 2,456 € 371,570
€ 18,578 € 2,578 € 374,148
€ 18,707 € 2,707 € 376,856
€ 18,843 € 2,843 € 379,698
€ 18,985 € 2,985 € 382,683
€ 19,134 € 3,134 € 385,817
€ 19,291 € 3,291 € 389,108
€ 19,455 € 3,455 € 392,564
€ 19,628 € 3,628 € 396,192
€ 19,808 € 3,808 € 400,000
€ 190,886 € 30,886

Account Tittle Debit Credit

€ 16,000
t Investment € 2,456
terest Revenue € 18,456
t Investment € 2,578
rest Receivable € 16,000
terest Revenue € 18,578
€ 370,726
 or Loss on Sale of Debt Inve € 8,972
ebt Investment € 379,698
ealized Holding Gain or Loss € 6,148
air Value Adjustment € 6,148