Question

On July 1, 2020, Whispering Ltd., which follows ASPE, issued 1,000 convertible, five-year, $1,000 bonds. Each bond is convertible into 20 common shares at the bondholder's option. On the date of issuance, the bond's conversion rights were valued at $51,000.

On July 1, 2023, the bonds had a carrying value on Whispering's books of $972,000, and the fair market value of the bonds without the convertible option was $980,000.

Assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2023.

Prepare the journal entry to record the conversion. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation    Debit Credit

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Assume instead that Whispering paid the bondholders an incentive of $17,000 to convert their bonds to common shares, and that all the bondholders agreed to convert their bonds to common shares on July 1, 2023.

Prepare the journal entry to record the conversion. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation Debit   Credit

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list of accounts

Accounts Payable
Bonds Payable
Cash
Common Shares
Compensation Expense
Contributed Surplus - Conversion Rights
Contributed Surplus - Conversion Rights Expired
Contributed Surplus - Expired Stock Options
Contributed Surplus - Stock Options
Contributed Surplus - Stock Warrants
Cost of Goods Sold
Deficit
Derivatives-Deposits
Derivatives - Financial Assets/Liabilities
Equipment
Equity - Fixed-for-fixed Derivative
Fair Value - NI Investments
Fair Value - OCI Investments
Future Income Tax Liability
Gain or Loss on Derivatives
Interest Expense
Interest Income
Interest Payable
Interest Receivable
Inventory
Liability under Share - Appreciation Rights Plans
Loss on Redemption of Bonds
Loss on Retirement of Bonds
No Entry
Notes Payable
Notes Receivable
Preferred Shares
Raw Materials
Retained Earnings
Sales Revenue
Supplies
Unrealized Gain or Loss - OCI

Answer 1

Ans: Journal Entry

Date	Account title and explanation	Debit($)	Credit($)
July 1,2023	Bonds Payable	972,000
	Contributed Surplus	51,000
	Common Shares		1,023,000
	{ to record the conversion of Bonds into shares}
July 1,2023	Bonds Payable	972,000
	Loss on Redemption of Bonds[980,000-972,000]	8,000
	Contributed Surplus	51,000
	Retained Earnings	9,000
	Common Shares		1,023,000
	Cash		17,000
	{ to record the conversion}