On January 1, 2020, Slug Corporation issued $5.3 million of 10%, 10-year convertible bonds at 102. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of $1 par common stock. Fuzz Company purchased 40% of the issue as an investment. On July 1, 2024, Fuzz converted all of its bonds into common stock of Slug. The market price per share for Slug was $25 at the time of the conversion. Both companies use the straight-line method for amortization. Requirement #1. For the issuance of the bonds: 1) how would the issuer record this transaction and 2) how would the investor record this transaction. Record separate journal entries for each side of the transaction. Requirement #2. For the conversion of the bonds to common: 1) how would the the issuer record the transaction and 2) how would the investor record the transaction. Prepare separate journal entries for each side of the transaction.
Get Answers For Free
Most questions answered within 1 hours.