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Calculate the liability and equity components

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Reference no: EM132919231

Aiman Bhd issued one million convertible bonds on 1 January 2011. The bonds have a term of three years and were issued with a total fair value of RM100 million which is also the par value. Interest is paid annually in arrears at a rate of 6% per annum. Similar bonds, without the conversion option, attract an interest rate of 9% per annum on 1 January 2011.

The following table shows the present value of RM1 at 6% and 9%.

Period            6%                    9%

1             0.943                0.917

2             0.890               0.842

3             0.840                   0.772

Required:

Problem a) Calculate the liability and equity components of the convertible bonds.

Problem b) Prepare journal entries to record the above transaction.

Problem c) Prepare an extract of the Statement of Financial Position as at 1 January 2011 to recognize the bonds.

Reference no: EM132919231

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