Question
In: Accounting
On January 1, 2018, Madison Products issued $41.7 million of 6%, 10-year convertible bonds at a...
On January 1, 2018, Madison Products issued $41.7 million of 6%,
10-year convertible bonds at a net price of $42.67 million. Madison
recently issued similar, but nonconvertible, bonds at 99 (that is,
99% of face amount). The bonds pay interest on June 30 and December
31. Each $1,000 bond is convertible into 30 shares of Madison’s no
par common stock. Madison records interest by the straight-line
method.
On June 1, 2020, Madison notified bondholders of its intent to call
the bonds at face value plus a 1% call premium on July 1, 2020. By
June 30 all bondholders had chosen to convert their bonds into
shares as of the interest payment date. On June 30, Madison paid
the semiannual interest and issued the requisite number of shares
for the bonds being converted.
Required:
1. & 2. Prepare the journal entry for the
issuance of the bonds by Madison and interest payment for the June
30, 2018.
3. Prepare the journal entries for the June 30,
2020, interest payment by Madison and the conversion of the bonds
(book value method).
Solutions
ekkarill92 answered 1 year agoRelated Solutions
On January 1, 2018, Madison Products issued $41.7 million of 6%, 10-year convertible bonds at a...
On January 1, 2018, Madison Products issued $41.7 million of 6%,
10-year convertible bonds at a net price of $42.67 million. Madison
recently issued similar, but nonconvertible, bonds at 99 (that is,
99% of face amount). The bonds pay interest on June 30 and December
31. Each $1,000 bond is convertible into 30 shares of Madison’s no
par common stock. Madison records interest by the straight-line
method.
On June 1, 2020, Madison notified bondholders of its intent to call
the...
On January 1, 2018, Madison Products issued $41.5 million of 6%, 10-year convertible bonds at a...
On January 1, 2018, Madison Products issued $41.5 million of 6%,
10-year convertible bonds at a net price of $42.45 million. Madison
recently issued similar, but nonconvertible, bonds at 98 (that is,
98% of face amount). The bonds pay interest on June 30 and December
31. Each $1,000 bond is convertible into 30 shares of Madison’s no
par common stock. Madison records interest by the straight-line
method. On June 1, 2020, Madison notified bondholders of its intent
to call the...
On January 1, 2018, Fowl Products issued $78 million of 8%, 10-year convertible bonds at a...
On January 1, 2018, Fowl Products issued $78 million of 8%,
10-year convertible bonds at a net price of $79.4 million. Fowl
recently issued similar, but nonconvertible, bonds at 98 (that is,
98% of face amount). The bonds pay interest on June 30 and December
31. Each $1,000 bond is convertible into 30 shares of Fowl’s no par
common stock. Fowl records interest by the straight-line
method.
On June 1, 2020, Fowl notified bondholders of its intent to call...
On January 1, 2023, Comet Products issued $40 million of 6%, 10-year convertible bonds at a...
On January 1, 2023, Comet Products issued $40 million of 6%,
10-year convertible bonds at a net price of $40.8 million. The
effective interest rate on the bond is 6.1352734%. Comet recently
issued similar, but nonconvertible, bonds at 99 (that is, 99% of
face amount). The bonds pay interest on June 30 and December 31.
Each $1,000 bond is convertible into 20 shares of Comet's no par
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On June 1, 2025, Comet notified bondholders of its intent to...
On January 1, 2018, Gless Textiles issued $13.5 million of 8%, 10-year convertible bonds at 102....
On January 1, 2018, Gless Textiles issued $13.5 million of 8%,
10-year convertible bonds at 102. The bonds pay interest on June 30
and December 31. Each $1,000 bond is convertible into 50 shares of
Gless’s no par common stock. Bonds that are similar in all
respects, except that they are nonconvertible, currently are
selling at 98 (that is, 98% of face amount). Century Services
purchased 9% of the issue as an investment.
Required:
Assume Gless Textiles prepares its financial...
On January 1, 2018, Gless Textiles issued $18 million of 7%, 10-year convertible bonds at 101....
On January 1, 2018, Gless Textiles issued $18 million of 7%,
10-year convertible bonds at 101. The bonds pay interest on June 30
and December 31. Each $1,000 bond is convertible into 40 shares of
Gless’s no par common stock. Bonds that are similar in all
respects, except that they are nonconvertible, currently are
selling at 99 (that is, 99% of face amount). Century Services
purchased 10% of the issue as an investment.
Required:
1. Prepare the journal entries for...
On January 1, 2018, Gless Textiles issued $10 million of 7%, 20-year convertible bonds at 101....
On January 1, 2018, Gless Textiles issued $10 million of 7%,
20-year convertible bonds at 101. The bonds pay interest on June 30
and December 31. Each $1,000 bond is convertible into 40 shares of
Gless’s no par common stock. Bonds that are similar in all
respects, except that they are nonconvertible, currently are
selling at 99 (that is, 99% of face amount). Century Services
purchased 15% of the issue as an investment.
Required:
1. Prepare the journal entries for...
On January 1, 2018, Gless Textiles issued $19 million of 8%, 10-year convertible bonds at 101....
On January 1, 2018, Gless Textiles issued $19 million of 8%,
10-year convertible bonds at 101. The bonds pay interest on June 30
and December 31. Each $1,000 bond is convertible into 40 shares of
Gless’s no par common stock. Bonds that are similar in all
respects, except that they are nonconvertible, currently are
selling at 99 (that is, 99% of face amount). Century Services
purchased 15% of the issue as an investment.
Required: 1. Prepare the journal entries for...
The Rockstar Corporation issued 10-year $900,000 par 6% convertible bonds on January 1, 2018 at 98....
The Rockstar Corporation issued 10-year $900,000 par 6%
convertible bonds on January 1, 2018 at 98. The bonds have a par
value of $1,000 with interest payable annually. Each bond is
convertible into 10 shares of common stock; in two years this ratio
will increase, meaning that each bond will be convertible into 30
shares of common stock. Assume Rockstar uses straight-line
amortization for its bonds and that its effective tax rate is 35%.
Net income in 2018 is $2,600,000...
On January 1, 2020 company issued $ 1.5 million of five year, 6% convertible bonds at...
On January 1, 2020 company issued $ 1.5 million of five year, 6%
convertible bonds at par value. Each $ 1000 bond is convertible
into 100 common shares. A similar bond (without conversion feature)
would have been issued at a market yield of 9%. In the same year on
December 31, $ 2000,000 worth of bonds were converted to common
shares.
Required: Calculate the value of the bond
according to IFRS and ASPE and also show the journal entries. The...
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