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.
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