Adilla ikhsani (1610533041)

1. For each of the unrelated transactions described below, present the entry(ies) required to record each
transaction.
1) Coyle SA issued €10,000,000 par value 10% convertible bonds at 99. If the bonds had not been
convertible, the company's investment banker determines that they would have been sold at 95.
Cash ($10,000,000 × 0.99) 9.900.000
Bonds Payable(10.000.0000.95) 9.500.000
Share Premium 400.000
2) Lambert AG issued €10,000,000 par value 10% bonds at 98. One share warrant was issued with each
€100 par value bond. At the time of issuance, the warrants were selling for €4. The net present value of
the bonds without the warrants was €9,600,000.
Cash ($10,000,000 × 0.98) 9.800.000
Bonds Payable 9.600.000
Share Premium—Stock Warrants 200.000

3) Sepracor, AG called its convertible debt in 2019. Assume the following related to the transaction. The
11%, €10,000,000 par value bonds were converted into 1,000,000 shares of €1 par value ordinary
shares on July 1, 2019. The carrying amount of the debt on July 1 was €9,700,000. The Share Premium
—Conversion Equity account had a balance of €200,000, and the company paid an additional €75,000
to the bondholders to induce conversion of all the bonds. The company records the conversion using
the book value method.

Share Premium - cONVERSION equity 200.000

Conversion expense 75.000

Bond Payable 9.700.000

Share Capital Ordinary 1.000.000

Share premium Ordinary 8.900.000

Cash 75.000

*Share premium Ordinary($9,700,000 - $200,000 - $1,000,000) = 8.900.000

The equity section of Martino AG at the beginning of the current year appears below.

Share capital—ordinary, €10 par value, authorized 1,000,000 shares, 300,000 €3,000,000
shares issued and outstanding
Share premium—ordinary 600,000
Retained earnings 570,000
During the current year, the following transactions occurred.

1. The company issued to the shareholders 100,000 rights. Ten rights are needed to buy one share at €32. The
rights were void after 30 days. The market price of the shares at this time was €34 per share.
2. The company sold to the public a €200,000, 10% bond issue at 104. The company also issued with each
€100 bond one detachable share-purchase warrant, which provided for the purchase of ordinary shares at
€30 per share. The net present value of the bonds without the warrants was €192,000.
3. All but 5,000 of the rights issued in (1) were exercised in 30 days.
4. At the end of the year, 80% of the warrants in (2) had been exercised, and the remaining were outstanding
and in good standing.
5. During the current year, the company granted share options for 10,000 ordinary shares to company
executives. The company using a fair value option-pricing model determines that each option is worth €10.
The option pr ice is €30. The options were to expire at year-end and were considered compensation for
the current year.
6. All but 1,000 shares related to the share-option plan were exercised by year-end. The expiration resulted
because one of the executives failed to fulfill an obligation related to the employment contract.

Instructions

a. Prepare general journal entries for the current year to record the transactions listed above.
b. Prepare the equity section of the statement of financial position at the end of the

1. Memo Entry

2. **Allocated to Bonds: $96/($96 + $8 ) X $208,000 = $192,000;

Discount = $200,000 – $192,000 = $8,000

**Allocated to Warrants: $8/($96 + $8) X $208,000 = $16,000

Cash 208,000

Bonds Payable* 192,000

Share-premium Share Warrant 16,000

3. [(100,000 – 5,000) rights exercised] ÷ [(10 rights/share) X $32 = $304,000

Cash 304,000

Share Capital Ordinary (9,500 X $10). 95,000

Share-premium Ordinary 209,000

4.80 X $200,000/$100 per bond = 1,600 warrants exercised; 1,600 X $30 = $48,000

Cash 48,000

Share-premium-share warants ($16,000 X 80%)12,800

Share-capital Ordinary(1,600 X $10) 16,000

Share-premium Ordinary 44,800

5.$10 X 10,000 options = $100,000

Compensation Expense 100,000

Paid-in Capital—Stock Options 100,000

6. For options exercised:

Cash (9,000 X $30) 270,000

Share-premium- share option

(90% X $100,000) 90,000

Common Stock (9,000 X $10) 90,000

Paid-in Capital in Excess of Par—

Common Stock 270,000

For options lapsed:

Paid-in Capital—Stock Options 10,000

Compensation Expense 10,000

(b) Stockholders’ Equity:

Paid-in Capital:

Share capital Ordinary , $10 par value, authorized

1,000,000 shares, 320,100 shares

issued and outstanding ........................... $3,201,000

Paid-in Capital in Excess of Par—

Common Stock*......................................... 1,123,800

Paid-in Capital—Stock Warrants*.............. 3,200 $4,328,000

Retained Earnings................................................ 750,000

Total Stockholders’ Equity ......................... $5,078,000

*These two accounts often are combined into one category called Additional Paid-in Capital, for financial reporting
purposes.

Common Stock Paid-in Capital

At beginning of year 300,000 shares $ 600,000

From stock rights (entry #3) 9.500 209.000

From stock warrants (entry #4) 1600 44.800
From stock options (entry #6) 9000 270.000
Total 320.100 1.123.800