Racquet Ltd issued $20 million of convertible notes on 1 July 2003.The notes have a life of 6 years and a face value of $20 each.Annual interest of 5 per cent is payable at the end of each year.The notes were issued at their face value and can be converted at any time over their lives.Organisations with a similar risk profile to Racquet Ltd have issued debt with similar terms but without the option to convert at the rate of 7 per cent.What are the appropriate accounting entries to record the conversion of the notes to equity on 1 July 2004 (after interest has been paid and recorded)?
A.

B.

C.

D.

E. None of the given answers.

Question

Racquet Ltd issued $20 million of convertible notes on 1 July 2003.The notes have a life of 6 years and a face value of $20 each.Annual interest of 5 per cent is payable at the end of each year.The notes were issued at their face value and can be converted at any time over their lives.Organisations with a similar risk profile to Racquet Ltd have issued debt with similar terms but without the option to convert at the rate of 7 per cent.What are the appropriate accounting entries to record the conversion of the notes to equity on 1 July 2004 (after interest has been paid and recorded)?
A.
  
B.
  
C.
  
D.
  
E. None of the given answers.

Quizplus · Accepted Answer

The Answer of Racquet Ltd issued $20 million of convertible notes on 1 July 2003.The notes have a life of 6 years and a face value of $20 each.Annual interest of 5 per cent is payable at the end of each year.The notes were issued at their face value and can be converted at any time over their lives.Organisations with a similar risk profile to Racquet Ltd have issued debt with similar terms but without the option to convert at the rate of 7 per cent.What are the appropriate accounting entries to record the conversion of the notes to equity on 1 July 2004 (after interest has been paid and recorded)?
A.
  
B.
  
C.
  
D.
  
E. None of the given answers.

Racquet Ltd Issued $20 Million of Convertible Notes on 1