Question

Garr Co. issued $4,088,000 of 12%, 5-year convertible bonds on December 1, 2017 for $4,105,272 plus...

Garr Co. issued $4,088,000 of 12%, 5-year convertible bonds on December 1, 2017 for $4,105,272 plus accrued interest. The bonds were dated April 1, 2017 with interest payable April 1 and October 1. Bond premium is amortized each interest period on a straight-line basis. Garr Co. has a fiscal year end of September 30.

On October 1, 2018, $2,044,000 of these bonds were converted into 29,000 shares of $15 par common stock. Accrued interest was paid in cash at the time of conversion.

a- Prepare the entry to record the interest expense at April 1, 2018. Assume that interest payable was credited when the bonds were issued.

b- Prepare the entry to record the conversion on October 1, 2018. Assume that the entry to record amortization of the bond premium and interest payment has been made.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Issue price = $4,105,272
Face value = $4,088,000
Total Premium = $17,272
Total months to maturity = 52 months
Premium per month to be amortised = $17,272 / 52 = $332.15 rounded off

Premium on bonds payable amortised on conversion:
Total premium = $17,272
Premium for bonds converted = $17,272 / 2 = $8,636
Premium already amortised = $1328.60 / 2 = $664.30
Remaining premium to be amortised on conversion = $8636 - $664.30 = $7971.70

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
S Co. issued $4,100,000 of 12%, 5-year convertible bonds on December 1, 2020 for $4,122,360 plus...
S Co. issued $4,100,000 of 12%, 5-year convertible bonds on December 1, 2020 for $4,122,360 plus accrued interest. The bonds were dated April 1, 2020 with interest payable April 1 and October 1. Bond premium is amortized each interest period on a straight-line basis. S Co. has a fiscal year end of September 30. On October 1, 2021, $2,050,000 of these bonds were converted into 28,000 shares of $15 par common stock. Accrued interest was paid in cash at the...
1. On April 1, 2020 Garr Co. issued $3,000,000 of 5%, 5-year convertible bonds at a...
1. On April 1, 2020 Garr Co. issued $3,000,000 of 5%, 5-year convertible bonds at a price of 98. The bonds pay interest on April 1 and October 1. Bond discount is amortized each interest payment period on a straight-line basis. On April 1, 2021, 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...
Sheffield Corp. issued $6000000 of 8%, ten-year convertible bonds on July 1, 2020 at 96.1 plus...
Sheffield Corp. issued $6000000 of 8%, ten-year convertible bonds on July 1, 2020 at 96.1 plus accrued interest. The bonds were dated April 1, 2020 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2021, $1150000 of these bonds were converted into 400 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion. What was the effective interest rate on the...
Chang Corporation issued $6,000,000 of 9%, ten-year convertible bonds on Jan 1, 2017 at 102. The...
Chang Corporation issued $6,000,000 of 9%, ten-year convertible bonds on Jan 1, 2017 at 102. The bonds were dated Jan 1, 2017 with interest payable June 30 and December 31. Bond discount is amortized semiannually on a straight-line basis. Each $1,000 debenture is convertible into 40 shares of Chang $20 par common stock. On Jan 1, 2018, $1,200,000 of these bonds were converted. What should be the amount of the debit to Interest Expense on June 30, 2017? a.   $306,000...
On May 1, 2018 Small Inc issued $600,000 of 4% 10 year convertible bonds at 103....
On May 1, 2018 Small Inc issued $600,000 of 4% 10 year convertible bonds at 103. Each $1,000 bond is convertible into 20 of Small's common shares. Bonds without conversion feature would have sold at 101. Interest payments for the bonds are made on April 30 each year. (Small's year end). On May 1, 2020 30% of the bonds were converted. Prepare the journal entries to record the issuance of the convertible bonds on May 1 2018 and the conversion...
On January 1, 2017, Gless Textiles issued $12 million of 9%, 10-year convertible bonds. The bonds...
On January 1, 2017, Gless Textiles issued $12 million of 9%, 10-year convertible bonds. The bonds were issued at a price that provided a yield to maturity of 8% (market rate). The bonds pay interest on June 30 and December 31 each year. 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 a yield to maturity of 11%. Answer...
Finks Co. has $2,500,000 (face value) of 8% convertible bonds outstanding which were issued at a...
Finks Co. has $2,500,000 (face value) of 8% convertible bonds outstanding which were issued at a premium. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on December 31. On December 31, 2020, the holders of 40% of the bonds exercised the conversion privilege. On that date, the market price of the common stock was $36. The total unamortized bond premium at the date of conversion (after the journal entry to...
LIEN company issues $5,600,000 of 12%, 40-year convertible bonds at 103. At the time of conversion,...
LIEN company issues $5,600,000 of 12%, 40-year convertible bonds at 103. At the time of conversion, the Premium on Bonds Payable account has a balance of $150,000. All convertible bonds are converted into common stocks, and each $1,000 bond is convertible into 10 shares of common stock with a par value of $1 per share. 1) Prepare the journal entry to record the issuance of convertible bonds. 2) Prepare the journal entry to record the bond conversion.
Presented below are selected transactions on the books of Bridgeport Corporation. May 1, 2017 Bonds payable...
Presented below are selected transactions on the books of Bridgeport Corporation. May 1, 2017 Bonds payable with a par value of $986,400, which are dated January 1, 2017, are sold at 107 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature January 1, 2027. (Use interest expense account for accrued interest.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper...
1. On January 1, 2017, Flounder Company issued $192,000 of 7%, 10-year bonds at par. Interest...
1. On January 1, 2017, Flounder Company issued $192,000 of 7%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1. 2. On June 1, 2017, Culver Company issued $144,000 of 10%, 10-year bonds dated January 1 at par plus accrued interest. Interest is payable semiannually on July 1 and January 1. For each of these two independent situations, prepare journal entries to record the following. (If no entry is required, select...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT