[Bookkeeping Memo] Summary of Accounting for Bonds with Stock Acquisition Rights | Complete Guide to the Component Method 💡📘
Hello, this is Satomi's Bookkeeping Notebook!
This time, I have summarized the accounting treatment for "Bonds with Stock Acquisition Rights (Convertible Bonds)," which frequently appear in the Nissho Bookkeeping Level 1 and Certified Public Tax Accountant exams, from issuance to maturity, focusing on the key points of the component method.
🔹1. Treatment at Issuance
🔹2. At Interest Payment and Closing
Bond Interest (each period) = Bond Book Value at Beginning of Period × Effective Interest Rate(Interest Method)
Treat the difference from nominal interest as "Amortization of Interest Adjustment"
🔹3. At Time of Exercise of Rights
Case ①: Issuance of New Shares
Exercise Amount: m thousand yen or Exercise Ratio: n%
Bond Book Value: ① = Book Value at Beginning of Period × (m thousand yen / Total Amount) or Book Value at Beginning of Period × n%
Bond Interest: ① × Effective Interest Rate
Stock Acquisition Rights: Stock Consideration Portion × (m thousand yen / Total Amount or n%)
Case ②: Delivery of Treasury Shares
(Calculation formulas are the same as for new share issuance)
Calculation of Bond Book Value, Bond Interest, and Stock Acquisition Rights is the same as above
🔹4. At Maturity (Component Method)
Remaining Redemption: ② = Remaining Bond Book Value × (m thousand yen / Total Amount) or × n%
Bond Interest: ② × Effective Interest Rate
*Under the non-component method, journal entries for stock acquisition rights are unnecessary
📌Point Memo
Under the separation method, record the stock acquisition rights and the bonds separately.
🎓 [Recommended Study Method]
When practicing past exam questions, focus on "amount allocation" and "interest calculation."
Using the diagrams in TAC and Ohara textbooks will also improve your retention rate!
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