Question

# On January 1, 2008 Roller Bearing Corporation issued \$6,000,000 of 10 year 6% convertible bonds at...

On January 1, 2008 Roller Bearing Corporation issued \$6,000,000 of 10 year 6% convertible bonds at 104.

Interest is paid semiannually on June 30th and December 31st each year. Each \$1,000 of bonds can be converted into 12 shares of \$45 par value common stock after December 31, 2011

On January 1, 2012, \$1,800,000 of bonds are converted into common stock that was now selling for \$60 per share.

Required: Prepare journal entries for each of following dates.

a. December 31, 2011

b. January 1, 2012

Journal entries:--

Date Particular Debit Credit
a. 31December,2011 Interest expenses 180,000
Cash 180,000
(For the payment of interest semiannually)
b. 1 January,2012 Bonds Payable 1,800,000
Common stock (21,600×\$45) 972,000
Paid-in-excess of par value 828,000
(For the conversion of bonds)
Cash (21,600×\$60) 1,296,000
Common stock (21,600×\$45) 972,000
(For the sale of common stock)

Calculating no.of shares:---

No.of Shares = 12 × 1,800,000/1,000 = 21,600 Shares

Calculating interest on Bonds Payable:--

Interest=6,000,000 ×6 /100 =\$360,00

Interest is paid semiannually,so Interest on 31December,2011 =360,000/2 =\$180,000

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