Question
In: Accounting
Western World Inc. issues $30,000,000 of convertible bonds with each $1,000 bond convertible into 15 shares...
Western World Inc. issues $30,000,000 of convertible bonds with each $1,000 bond convertible into 15 shares of the company’s $1 par common stock. The bonds are issued at 102 on January 1, 2019 and pay interest in Jan and July and mature on January 1, 2024. On July 1, 2020, 30% of the bonds are converted when the stock price is $80 per share and 30% of the bond premium has been amortized.
Record the following transactions:
a. Bond as issuance
b. Conversion of $30,000,000 in bonds to common stock.
Solutions
Expert Solution
Required journal entries are as prepared below:
| Year | Particulars | L.F | Debit ($) | Credit ($) | |
| 2019 | |||||
| a | Jan-01 | Cash (30,000,000*1.02) | 30,600,000 | ||
| Premium on bonds payable | 600,000 | ||||
| Bonds Payable | 30,000,000 | ||||
| (For bonds issued at premium) | |||||
| 2020 | |||||
| b | Jan-01 | Bonds Payable (30,000,000*.3) | 9,000,000 | ||
| Premium on Bonds Payable | 126,000 | ||||
| Loss on bonds conversion | 1,674,000 | ||||
| Additional paid in capital-common stock (9,000*15*79) | 10,665,000 | ||||
| Common Stock (9,000*15*1) | 135,000 | ||||
| (For bonds converted into stock) |
Working:
| Bonds converted into stock | |
| 30,000,000*.3 | 9,000,000 |
| Premium on Bonds converted | |
| 600,000*.3 | 180000 |
| Premium already amortized in 2019 | |
| 30% of 180,000 | 54000 |
| Unamortized premium | 126000 |
ekkarill92 answered 1 month agoRelated Solutions
On 1/1/2018, Husky, Inc. issues $20,000,000 of five-year, 1% convertible bonds at par. Each $1,000 bond...
On 1/1/2018, Husky, Inc. issues $20,000,000 of five-year, 1%
convertible bonds at par. Each $1,000 bond in the issue converts to
20 shares of $1 par value common stock at the option of the
bondholder beginning two years after issue. The market price of
Husky’s common stock on the date of issue is $54 and interest is
paid annually each December 31. Assume that
half of the bonds were converted on
1/1/2020 and at that date the carrying value (net...
Q16: Suppose a firm issues a 1,000 Convertible Preference Shares for with a par value of...
Q16: Suppose a firm issues a 1,000 Convertible Preference Shares
for with a par value of $100 each. Each preference share is
convertible into 5 Ordinary Shares with a par value of $5. The
credit entry to “Share Premium – Conversion Equity” on the date of
issue was for $200,000. Assume that the maturity date
of the Convertible Shares has now arrived and the Convertible
Preference Shares will be converted into Ordinary Shares.
The Credit Entry to the “Share Premium...
Q11: Suppose a firm issues a 1,000 Convertible Preference Shares for with a par value of...
Q11: Suppose a firm issues a 1,000 Convertible Preference Shares
for with a par value of $100 each. Each preference share is
convertible into 5 Ordinary Shares with a par value of $5. The
credit entry to “Share Premium – Conversion Equity” on the date of
issue was for $200,000. Assume that the maturity date
of the Convertible Shares has now arrived and the Convertible
Preference Shares will be converted into Ordinary Shares.
The Debit Entry to the “Share Capital...
In 2019, Pharoah Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares...
In 2019, Pharoah Enterprises issued, at par, 60 $1,000, 8%
bonds, each convertible into 100 shares of common stock. Pharoah
had revenues of $18,800 and expenses other than interest and taxes
of $8,000 for 2020. (Assume that the tax rate is 20%.) Throughout
2020, 1,800 shares of common stock were outstanding; none of the
bonds was converted or redeemed.
(a) Compute diluted earnings per share for 2020.
(Round answer to 2 decimal places, e.g.
$2.55.)
Earnings per share
$
(b)...
In 2019, Marigold Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares...
In 2019, Marigold Enterprises issued, at par, 60 $1,000, 8%
bonds, each convertible into 100 shares of common stock. Marigold
had revenues of $16,000 and expenses other than interest and taxes
of $6,700 for 2020. (Assume that the tax rate is 20%.) Throughout
2020, 2,400 shares of common stock were outstanding; none of the
bonds was converted or redeemed.
(a) Compute diluted earnings per share for 2020.
(Round answer to 2 decimal places, e.g.
$2.55.)
Earnings per share
$
(b)...
In 2019, Marigold Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares...
In 2019, Marigold Enterprises issued, at par, 60 $1,000, 8%
bonds, each convertible into 100 shares of common stock. Marigold
had revenues of $16,000 and expenses other than interest and taxes
of $6,700 for 2020. (Assume that the tax rate is 20%.) Throughout
2020, 2,400 shares of common stock were outstanding; none of the
bonds was converted or redeemed.
(a) Compute diluted earnings per share for 2020.
(Round answer to 2 decimal places, e.g.
$2.55.)
Earnings per share
$
(b)...
In 2016, Pronghorn Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares...
In 2016, Pronghorn Enterprises issued, at par, 60 $1,000, 8%
bonds, each convertible into 100 shares of common stock. Pronghorn
had revenues of $18,200 and expenses other than interest and taxes
of $8,400 for 2017. (Assume that the tax rate is 40%.) Throughout
2017, 2,000 shares of common stock were outstanding; none of the
bonds was converted or redeemed. (a) Compute diluted earnings per
share for 2017. (Round answer to 2 decimal places, e.g. $2.55.)
Earnings per share $ (b)...
Net income for the year $1,210,000 7% convertible bonds issued at par ($1,000 per bond); each...
Net income for the year
$1,210,000
7% convertible bonds issued at par ($1,000 per bond); each bond
is convertible into
30 shares of common stock
2,000,000
6% convertible, cumulative preferred stock, $100 par value; each
share is convertible
into 3 shares of common stock
4,080,000
Common stock, $10 par value
6,130,000
Tax rate for 2021
20%
Average market price of common stock
$25 per share
There were no changes during 2021 in the number of common shares,
preferred shares,...
Butler Company issued $100,000 of convertible bonds for $95,600 on September 1, 2017. Each $1,000 bond...
Butler Company issued $100,000 of convertible bonds for $95,600
on September 1, 2017. Each $1,000 bond is convertible into 30
shares of Butler’s $5 par value common stock beginning on September
1, 2022. On September 1, 2022, holders of 15 bonds converted their
bonds into the company’s common stock. The market value of the
common stock on the day of conversion was $40 per share, and the
unamortized discount on all 100 bonds on the same date was $2,300.
10....
If sixty $1,000 convertible bonds with a carrying value of $70,000 are converted into 9,000 shares...
If sixty $1,000 convertible bonds with
a carrying value of $70,000 are converted into 9,000 shares of $5
par value common stock, the journal entry to record the conversion
is
Account Titles and Explanation
Debit
Credit
Bonds Payable (60 x $1000)
60,000
Premium on Bonds Payable (70,000 - 60,000)
10,000
Common Stock (9000 shares x 5)
45,000
Paid-in Capital in Excess of Par (70000 - 45000)
25,000
Please explain where does that bonds payable (60x 1000) comes
from?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- what effect would DNP have on ATP production? if added to culture media, which of the...
- - True to its name, computer networking technologies allow computers of many kinds to be connected...
- 1. (a) Kyan Barron has been made jobless from a managerial position in a financial institution...
- (Calculating the geometric and arithmetic average rate of return) The common stock of the Brangus Cattle...
- --- TURN this Code into Java Language --- #include <iostream> #include <string> using namespace std; //...
- The following bivariate data set contains an outlier. x y 53.3 151.7 37.1 -307.3 44.6 -469.7...
- Washington County’s Board of Representatives is considering the construction of a longer runway at the county...
ADVERTISEMENT