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P 16-9 on september 30,2017, Gargiola inc. Issued 4millions of 10 year, 8% convertible bonds for...

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Accounting

P 16-9 on september 30,2017, Gargiola inc. Issued 4millions of10 year, 8% convertible bonds for 4.6millions. The bonds payinterest on march 31 and September 30 and mature on September 30,2027. Each 1000$ bond can be converted into 80 no par value commonshares. In addition, each bond include 20 detachable warrants. Eachwarrant can be used to purchase one common share at an exerciseprice of 15$. Immediately after the bond issuance, the warrantstraded at 3$ each. Without the warrants and the conversion rights,the bonds would have been expected to sell for 4.2 million. Onmarch 23, 2020, half of the warrants were exercised. The commonshares of Gargiola inc. were trading at 20$ each on this day.Immediately after the payment of interest on the bonds, onseptember 30, 2022, all bonds outstanding were converted intocommon shares.

Instructions:

B) calculate the effective rate for the bonds. Leave at least 4decimal place in your calculations C) prepare a bond amortizationschedule from september 30, 2017 to september 30, 2022 using theeffective interest rate

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Part b
PV $                        4,200,000 Bond value without conversion right
I
N                                         20 Period (10*2)
PMT $                          -160,000 4million*4%
FV $                      -4,000,000 Face Value
Type                                            -  
RATE(N,PMT,PV,FV,Type)
3.6436% Effective Rate
Part c
Date Cash Paid 4% Effective Interest 3.6436% Premium Amortization Carrying Value
4m*4%
Sep 30 2017 $      4,200,000
Mar 31, 2018 $                                              160,000 $                             153,031 $                            6,969 $      4,193,031
Sep 30 2018 $                                              160,000 $                             152,777 $                            7,223 $      4,185,808
Mar 31, 2019 $                                              160,000 $                             152,514 $                            7,486 $      4,178,323
Sep 30 2019 $                                              160,000 $                             152,241 $                            7,759 $      4,170,564
Mar 31, 2020 $                                              160,000 $                             151,959 $                            8,041 $      4,162,523
Sep 30 2020 $                                              160,000 $                             151,666 $                            8,334 $      4,154,188
Mar 31, 2021 $                                              160,000 $                             151,362 $                            8,638 $      4,145,550
Sep 30 2021 $                                              160,000 $                             151,047 $                            8,953 $      4,136,598
Mar 31, 2022 $                                              160,000 $                             150,721 $                            9,279 $      4,127,319
Sep 30 2022 $                                              160,000 $                             150,383 $                            9,617 $      4,117,702

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