Worksheet cacluation equity element and carry value of convertible bond

1. CONVERTIBLE BOND
Example
At 01-01-14
Par value 100.000 USD
Period 2 year Interest amount
Norminal rate 2% in arrears 2.000
Effecctive rate 5% 5.000
Redeemtion date: option to covert 8 shares (norminal value $10) each $100 debt
Solution
Calculation Journal entry
Discount factor
Year 1 0,9524
Year 2 0,9070
Year 3 0,8638
Total 2,7232
01-01-14
PV of principal 86.383,8 Dr Cash 100.000
Accumulated interest 5.446,5 Cr Debt (Financial liablity) 91.830,3
Fair value of debt element 91.830,3 Cr Equity 8.169,7
Fair value of equity element 8.169,74
31-12-14
PV of principal 91.830,3 Dr Interest expense 4 .591,5
Interest unwinding 4.591,5 Cr Loans 2.591,5
Norminal/Cashflow (2.000) Cr Cash 2.000
Carrying value 94.421,8

2. 31-12-15
PV of principal 94.421,8 Dr Interest expense 4 .721,1
Interest unwinding 4.721,1 Cr Loans 2.721,1
Norminal/Cashflow (2.000) Cr Cash 2.000
Carrying value 97.142,9
31-12-16
PV of principal 97.142,9 Dr Interest expense 4 .857,1
Interest unwinding 4.857,1 Cr Loans 2.857,1
Norminal (2.000) Cr Cash 2.000
Carrying value 100.000,0
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