High PG Ltd is a production company with an average return on assets of 8.0% and
ID: 2328683 • Letter: H
Question
High PG Ltd is a production company with an average return on assets of 8.0% and an average cost of debt of 7.7%. The company needs to raise additional funds in a competitive market environment. The Balance Sheet shows the company is currently financed as follows:
Equity and Liabilities
Position
AUD
Current Liabilities
$
33,033,000
Non-Current Liabilities
$
9,317,000
Total Liabilities
$
42,350,000
Share Capital
$
85,425,000
Accumulated losses
$
(28,475,000)
Total equity
$
56,950,000
High PG Ltd Convertible Bond
Instrument
Convertible Bond
Issue size
AUD 15million
Coupon
5%, annual payment
Settlement date
01-January-2019
Maturity date
31-December-2021
Conversion rate
15million $1 shares at maturity
Without the conversion feature, the
Note
bond would be priced the same as the
corporate Bond.
Question: Provide the journal entries for the High PG Ltd Convertible Bond from 1 January 2019 to 31 December 2021. Refer to the specific Australian accounting standards. Assume the bond is converted at maturity.
Equity and Liabilities
Position
AUD
Current Liabilities
$
33,033,000
Non-Current Liabilities
$
9,317,000
Total Liabilities
$
42,350,000
Share Capital
$
85,425,000
Accumulated losses
$
(28,475,000)
Total equity
$
56,950,000
Explanation / Answer
DATE PARTICULARS AMOUNT ( IN AUD MILLIONS )
01.JAN.2019 BANK A/C DR 15.00
TO 5 % CONVERTIBLE BONDS 15.00
( BEING BONDS HAVE BEEN ISSUED )
31.DEC.2019 INTEREST A/C DR 0.75
TO BANK A/C 0.75
( BEING INTEREST PAID )
31.DEC 2020 INTEREST A/C DR 0.75
TO BANK A/C 0.75
( BEING INTEREST PAID )
31 DEC 2021 INTEREST A/C DR 0.75
TO BANK A/C 0.75
( BEING INTEREST PAID )
31 DEC 2021 5 % CONVERTIBLE BONDS A/C DR 15.00
TO BANK A/C 15.00
( BEING BONDS REDEEMED )
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