Question

So, here we go. I have never done this before. Sorry if I am violating any rules. But I am stuck on several parts of a question. Only answered marked incorrect are incorrect. everything else is right.

The question states:

Bradley-Link’s December 31, 2018, balance sheet included the following items:

Long-Term Liabilities	($ in millions)
11.0% convertible bonds, callable at 102 beginning in 2019, due 2022 (net of unamortized discount of $3) [note 8]	$247
11.0% registered bonds callable at 105 beginning in 2028, due 2032 (net of unamortized discount of $1) [note 8]	68
Shareholders’ Equity	6
Equity—stock warrants

Note 8: Bonds (in part)
The 11.0% bonds were issued in 2005 at 98.0 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond is convertible into 50 shares of the Company’s no par common stock.

The 11.0% bonds were issued in 2009 at 103 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitles the holder to purchase one share of the Company’s no par common stock for $30, beginning 2019.

On January 3, 2019, when Bradley-Link’s common stock had a market price of $37 per share, Bradley-Link called the convertible bonds to force conversion. 90% were converted; the remainder were acquired at the call price. When the common stock price reached an all-time high of $42 in December of 2019, 40% of the warrants were exercised.

Required:
1. Prepare the journal entries that were recorded when each of the two bond issues was originally sold in 2005 and 2009.
2. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2019 and the retirement of the remainder.
3. Assume Bradley-Link induced conversion by offering $170 cash for each bond converted. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2019.
4. Assume Bradley-Link induced conversion by modifying the conversion ratio to exchange 55 shares for each bond rather than the 50 shares provided in the contract. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2019.
5. Prepare the journal entry to record the exercise of the warrants in December 2019.

Here are my answers (some are right, some are wrong)

#1 - Prepare the journal entries that were recorded when each of the two bond issues was originally sold in 2005 and 2009. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 10,000,000 should be entered as 10)). (THIS PROBLEM IN COMPLETELY CORRECT)

No	Event	General Journal	Debit	Credit
1	1	Cashselected answer correct	245
		Discount on bonds payable	5
		Convertible bonds payable		250
2	2	Cash	71.1
		Discount on bonds payable	3.9
		Bonds payable		69
		Equity—stock warrants		6

#2 -

Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2019 and the retirement of the remainder. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5)).

No	Event	General Journal	Debit	Credit
1	1	Convertible bonds payablet	225.0
		Discount on bonds payable		4.5 (INCORRECT
		Common stock		220.5 (INCORRECT
2	2	Convertible bonds payablE	25.0
		Loss on early extinguishment	1.0 (INCORRECT)
		Discount on bonds payable		0.5 (incorrect)
		Cash		25.5

#3 -

Assume Bradley-Link induced conversion by offering $170 cash for each bond converted. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2019. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5)).

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No	Event	General Journal	Debit	Credit
1	1	Convertible bonds payable	225.0
		Conversion expense	38.3
		Discount on bonds payable		4.5 (incorrect)
		Common stockselected answer correct		220.5 (incorrect)
		Cashselected answer correct		38.3

#4 -

Assume Bradley-Link induced conversion by modifying the conversion ratio to exchange 55 shares for each bond rather than the 50 shares provided in the contract. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2019. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5)).

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No	Event	General Journal	Debit	Credit
1	1	Convertible bonds payable	225.0
		Conversion expense	41.6
		Discount on bonds payable		4.5 (incorrect)
		Common stock		262.1 (incorrect)

#5 -

Prepare the journal entry to record the exercise of the warrants in December 2019. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5)). (I WAS NOT ABLE TO ANSWER ANY OF THE DR OR CR CONFIDENTLY, ALL WERE LEFT BLANK)

No	Event	General Journal	Debit	Credit
1	1	Cash	not attempted	not attempted
		Equity—stock warrants	not attempted	not attempted
		Common stock	not attempted	not attempted

Answer 1

Answer- 1:

Event	Title of Accounts	Debit	Credit
1	Cash	245
	Discount on Bonds Payable	5
	11% Convertible Bonds Payable		250
2	Cash	71.07
	Discount on Bonds Payable	3.93
	11% Bonds Payable		69
	Equity-Stock Warrants		6

Answer-2:

Event	Title of Accounts	Debit	Credit
1	11% Convertible Bonds Payable (250 * 90%)	225
	Discount on Bonds Payable (3 * 90%)		2.7
	Common Stock		222.3
2	11% Convertible Bonds Payable (250 * 10%)	25
	Loss on Early Extinguishment	0.8
	Discount on Bonds Payable (3 * 10%)		0.3
	Cash {(25000000 / 100) * 102}		25.5

Answer-3:

Event	Title of Accounts	Debit	Credit
1	11% Convertible Bonds Payable (250 * 90%)	225
	Conversion Expense	38.25
	Discount on Bonds Payable (3 * 90%)		2.7
	Common Stock		222.3
	Cash		38.25

Answer-4:

Event	Title of Accounts	Debit	Credit
1	11% Convertible Bonds Payable (250 * 90%)	225
	Conversion Expense	41.6
	Discount on Bonds Payable (3 * 90%)		2.7
	Common Stock		263.9