On April 1, 2019 Garr Co. issued $4,800,000 of 5%, 5-year convertible bonds at a price...

On April 1, 2019 Garr Co. issued $4,800,000 of 5%, 5-year convertible bonds at a price of 102. The bonds pay interest on April 1 and October 1. Bond premium is amortized each interest payment period on a straight-line basis.

On April 1, 2020, all of these bonds were converted into 20,000 shares of $5 par common stock.

a) Prepare the entry to record the original issuance of the convertible bonds.

b) Prepare the entries to record the interest payment and premium amortization at October 1, 2019 and April 1, 2020.

c) Prepare the entry to record the conversion on April 1, 2020.

Expert Solution


S.No.	Date	Accounts Title and Explanation	Debit	Credit
a)	April 1, 2019	Cash	4,896,000
		Bonds Payable		4,800,000
		Premium on bonds payable		96,000
		(To record bonds issue)


b)	October 1, 2019	Interest Expense	110,400
		Premium in bonds paayble	9,600
		Cash		120,000
		(To record inteterest expense)

	April 1, 2020	Interest Expense	110,400
		Premium in bonds paayble	9,600
		Cash		120,000
		(To record inteterest expense)


c)	April 1, 2020.	Premium in bonds paayble	76,800
		Bonds Payable	4,800,000
		Common Stock		100,000
		Excess apaid in capital		4,776,800
		(To record conversion of bonds)

ekkarill92 answered 1 year ago

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