Norman Co., a fast-growing golf equipment company, uses U.S. GAAP. It is considering the issuance of convertible bonds. The bonds mature in 10 years, have a face value of $400,000, and pay interest...

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Norman Co., a fast-growing golf equipment company, uses U.S. GAAP. It is considering the issuance of convertible bonds. The bonds mature in 10 years, have a face value of $400,000, and pay interest annually at a rate of 4%. The estimated fair value of the equity portion of the bond issue is $35,000. Greg Shark is curious as to the difference in accounting for these bonds if the company were to use iGAAP.

(a) Prepare the entry to record issuance of the bonds at par under U.S. GAAP.

(b) Repeat the requirement for part (a), assuming application of iGAAP to the bond issuance.

(c) Which approach provides the better accounting? Explain.


Answered Same DayDec 22, 2021

Answer To: Norman Co., a fast-growing golf equipment company, uses U.S. GAAP. It is considering the issuance of...

David answered on Dec 22 2021
131 Votes
Solution
(a) Issuance of Bonds at par under US GAAP
Account Title Debit Credit
Cash 400,000

Bonds Payable 400,000
(Bonds issued at par)
(b) Issuance of bonds under iGAAP
Account Title Debit Credit
Cash 400,000
Bonds Payable 365,000
Equity conversion 35000...
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