Cheery Company Follows IFRS for Its Financial Reporting

question 16

Multiple Choice

Cheery Company follows IFRS for its financial reporting. On January 1, 2015 Cheery issued €250 million of 10-year convertible notes that pay interest at 5% annually. Investors pay €250 million for the notes even though the company's credit risk at the time implies a 10% interest rate for traditional debt of similar duration. When the cash flows associated with the debt are discounted at 10%, the resulting value is €175 million.
-When Cheery records interest expense on December 31,2015 the entry will include

• A)A debit to interest expense for €25 million.
• B)A credit to convertible notes payable for €12.5 million.
• C)A debit to convertible notes payable for €17.5 million.
• D)A credit to convertible notes payable for €5 million

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The tendency to seek, interpret, and remember information in a way that favorably increases one’s self-esteem or self-worth.

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A condition where an individual holds a low or negative assessment of their own worth or value.

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