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Central Ltd issues $1 million of convertible bonds on 1 July 2025. The bonds have a 5-year term, a face value of $100.00 each, and they offer interest, payable at the end of each financial year, at a rate of 5% per annum. The bonds are issued at their face value, and each bond can be converted into one ordinary share in Central Ltd at the option of the holders at any time in the next 5 years. Organisations of a similar risk profile have recently issued debt with similar terms, without the option for conversion, at a rate of 7 % per annum. Required: i. Calculate the present value of the bonds and equity components of the bonds (Please CLICK HERE to view the PRESENT VALUE TABLE). (4 marks) ii. Provide the journal entries to account for the issue of the convertible bonds (3 marks) iii. Provide the journal entries to account for the interest payment at the end of the first year, i.e., 30 June 2026. Central Ltd issues $1 million of convertible bonds on 1 July 2025. The bonds have a 5-year term, a face value of $100.00 each, and they offer interest, payable at the end of each financial year, at a rate of 5% per annum. The bonds are issued at their face value, and each bond can be converted into one ordinary share in Central Ltd at the option of the holders at any time in the next 5 years. Organisations of a similar risk profile have recently issued debt with similar terms, without the option for conversion, at a rate of 7 % per annum. Required: i. Calculate the present value of the bonds and equity components of the bonds (Please CLICK HERE to view the PRESENT VALUE TABLE). (4 marks) ii. Provide the journal entries to account for the issue of the convertible bonds (3 marks) iii. Provide the journal entries to account for the interest payment at the end of the first year, i.e., 30 June 2026. (3 marks) iv. Provide the journal entries to account for the conversion of the bonds, if the conversion occurs in the second year, i.e., 30 June 2027.

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INSTANT ANSWER

in terms of new zealand What are the financial reporting consequences if a financial instrument, such as a preference share, is classified as debt rather than equity? How does this classification impact the Statement of Profit or Loss and the Statement of Financial Position?

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What are the financial reporting consequences if a financial instrument, such as a preference share, is classified as debt rather than equity? How does this classification impact the Statement of Profit or Loss and the Statement of Financial Position?

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On 30 June 2023, the equity accounts of Mega Ltd consisted of the following: 300 000 ordinary shares, issued at $3 each, fully paid $ 900 000 100,000, 5% cumulative preference shares, issued at $4 paid to $2 200,000 Options (200,000 at 10c each) 20,000 General reserve 150 000 Additional information 1. The options were excercisable between 1 April 2024 and 30 June 2024. Each option allowed the holder to buy one ordinary share for $3. 2. The following transactions and events occurred during the year ended 30 June 2024 15 July 2023 The directors issued a prospectus offering 100,000 ordinary shares at an issue price of $3, payable $2 on application and $1 as a future call. The closing date for application 15 August 2023. 15 August 2023 Applications for 125,000 shares have been received. 30 August 2023 The directors allotted the shares pro rata, with applicants receiving 80% of their requested shares. The excess application monies were retained and used to offset future calls payable. 1 September 2023 The share issue cost of $ 5,000 was paid. The directors made the final call on $2 on the preference shares. 30 September 2023 Call monies were received for all preference shares except for 200 shares. 10 October 2023 The directors decided to forfeit 200 preference shares for non-payment of the call. The forfeited amounts will neither be refunded to shareholders nor reissued. 31 December 2023 The directors announced an interim dividend of 10c per ordinary share payable in cash on 1 February. 15 April 2024 The holders of 15,000 options applied to purchase shares. All monies were sent with the applications. The shares were duly issued. 30 June 2024 The directors decided to use the general reserve to fund the payment of 40,000 bonus shares, which being issued at $2 per share. Required Prepare general journal entries to record the above transactions during the year ending 30 June 2024

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After yesterday’s board meeting, Albany Construction Limited (ACL) agreed to change its current capital structure. The current capital structure of ACL is based on the view that no debt or a low level of debt is better than a high level of debt. Due to a change in the global business environment, ACL board members now believe that a high level of debt is necessary for the future growth of the company. ACL currently has a $200,000 long-term bank loan paying 9% interest. It also has 80,000 ordinary shares on issue under the current structure. The proposed capital structure will double the amount of the current bank loan to $400,000, but ACL will need to pay 12% interest. With this change, the number of ordinary shares on issue would reduce to 40,000 shares. ACL operates in the construction industry and the proposed capital structure is based on the industry average. ACL pays 28% tax on its income. Briefly explain the major shortcoming of EBIT/EPS analysis.

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Yujie Wang

Numerade educator

List two qualitative factors which RTE Ltd's management need to consider relating to this decision. iii. Define relevant costs and provide an example of a relevant cost from the information provided in this question. iv. Define opportunity costs in terms of short-term decision making. Provide an example.

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Yujie Wang

Numerade educator

RTE Ltd currently manufactures a part that it exclusively uses for one of its main products. The costs per unit of this part are as follows: Mini Ltd has contacted RTE Ltd with an offer to sell it 5,000 units of this part for $58 each. Direct materials $ 6 Direct labour $32 Variable overhead $12 Fixed overhead $20 Total $70 Required: Show all your workings. i. Should RTE Ltd manufacture the part themselves or purchase it from Mini Ltd? Support your decision with calculations.

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Anand Jangid

Numerade educator

PGT Ltd uses a standard costing system and applies overhead on the basis of direct labour hours. The direct labour standard indicates that two direct labour hours should be used for every unit produced. The normal production volume is 200,000 units. The budgeted overhead for the coming year is as follows: Variable Overhead (at normal level) Fixed Overhead $ 888,000 $1,540,000 Actual results: • Manufactured 194,000 units. • Worked 392,000 direct labour hours. • Incurred actual fixed overhead costs of $1,560,000. • Incurred actual variable overhead costs of $862,400. Required: Show all your workings i. Calculate the standard variable overhead rate and the standard fixed overhead rate. (2 marks) ii. Calculate the variable overhead spending and efficiency variances. (4 marks) iii. Calculate the fixed overhead budget (spending) and volume variances.

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Breanna Ollech

Numerade educator

In March 2024, ABC Ltd manufactured 18,000 and sold 16,500 units. The cost per unit produced was as follows: Direct material $ 8.00 Direct labour $ 4.00 Variable overhead $ 2.00 Fixed overhead $ 3.00 Total $17.00 • There was no beginning inventory for March. • Variable selling cost per unit is $1.00 per unit sold. • Fixed Selling cost is $15,000. • The sales price per unit is $30. Required: Show all your workings. Ignore income tax. prepare a variable costing contribution margin statement for ABC Ltd for the month ending 31 March 2024. (7 marks)

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