compound financial instruments

There must be a contract.

There are at least two parties to the contract.

The contract shall give rise to a financial asset of one party and financial liability or equity instrument of another party.

Market Value of Bonds with warrants

Share Warrants Outstanding

Less: Face Value of Bonds

= Discount/Premium of Bonds Payable

Bonds payable issued w/ share Bonds payable issued w/ share warrantswarrants

Cash xx

Disc. on Bondsxx

Bonds Payable xx

Share warrants outs. xx

Cash xx

Premiums on B/Pxx

Disc. on Bonds xx

Share warrants outs. xx

Cash xx

Share warrants outs. xx

Share Capital (# of shares x par val.) xx

Share Premium (balancing figure)xx

Market Value of Bonds w/o Conversion Privilege

Share Premium – Conversion PrivilegeLess: Face Value of Bonds

= Discount/Premium of Bonds Payable

Convertible BondsConvertible Bonds

Cash xx

Disc. on Bondsxx

Bonds Payable xx

Sh.Prem-conv.priv. xx

Cash xx

Premiums on B/Pxx

Disc. on Bonds xx

Sh.Prem-conv.priv. xx

Bonds Payable (@ Face Value) xx

Sh.Prem-conv.priv. xx

Premium on B/P (unamortized) xx

Share Capital (# of shares x par val.) xx

Share Premium (balancing figure)xx

•Retained Earnings xx

Share Dividends Payablexx

* Charged at cost of treasury shares

•Share Dividends Payable xx

Treasury Sharexx

•Retained Earnings-free xx

R/E appropriate for T/Sxx

•R/E appropriate for T/S xx

Retained Earnings-free xx

Non-distributable equity reserves usually Non-distributable equity reserves usually include the following:include the following:

Appropriaton reserve

Share premium reserve

Asset revaluation reserve

Other comprehensive income reserve

Retained Earnings, Beg. xx

Less: Correction of owners/prior period errors(xx)

Add: Change in accounting policy xx_

= Corrected beginning balance xx

+/- Net Income/(Net Loss) xx

- Dividends Declared during the year (xx)

- Appropriated for contingencies (xx)_

= Retained Earnings – free xx