An example of a mandatory corporate action for a PIK bond that pays in both cash and bond follows. That is, you specify both a cash rate and a baby bond rate.
Add Mandatory PIK Bond Announcement paying part in Cash and part in Bond:
Account PIKDEMO owns 1,000,000.00 of ITSA Limited.
On 20031220, ITSA Limited pays in kind a Coupon based on an 8% Coupon Rate,
And pays in Cash based upon 4%.
...
| Info |
|---|
You enter the Baby Bond Price on the Corporate Action Announcement panel in the case of a Mandatory action, or on the Entity Election panel in the case of a Voluntary action. See the previous figure. |
In this scenario, Eagle Accounting creates Cash Receivable of 20,000.00, payable on 20031220. Eagle Accounting creates an Open Lot with the following attributes:
Trade Date: 20031215
Settle Date: 20031220
Par: 40,000.00
Price: 99
Cost: 39,600.00
General Ledger Entries
General Ledger Entries created on 20031215 appear in the following table.
General Ledger Entries for Mandatory PIK Bond Paid in Cash/Bond | |||||||
|---|---|---|---|---|---|---|---|
Trade Date | Accounting Date | Post Date | Ledger Account | Ledger Account Description | dr amt | cr amt | Net dr cr amt |
Dec 15 2003 | Dec 15 2003 | May 21 2004 | 1007000500 | Investments Interest Receivable | 0.00 | 40,000.00 | (40,000.00) |
Dec 15 2003 | Dec 15 2003 | May 21 2004 | 1010000100 | Cost of Investments | 39,600.00 | 0.00 | 39,600.00 |
Dec 15 2003 | Dec 15 2003 | May 21 2004 | 4001000100 | Investment Interest Income | 400.00 | 0.00 | 400.00 |
Dec 15 2003 | Dec 15 2003 | May 21 2004 | 1007000500 | Investments Interest Receivable | 1,666.67 | 0.00 | 1,666.67 |
Dec 15 2003 | Dec 15 2003 | May 21 2004 | 1010000100 | Cost of Investments | 0.00 | 142.45 | (142.45) |
Dec 15 2003 | Dec 15 2003 | May 21 2004 | 4001000100 | Investment Interest Income | 0.00 | 1,666.67 | (1,666.67) |
Dec 15 2003 | Dec 15 2003 | May 21 2004 | 4001000401 | Amortization of Premium | 142.45 | 0.00 | 142.45 |
1,809.12 | 1,809.12 | (0.00) | |||||