Question

For each of the unrelated transactions described below, present the entries required to record each transaction.

1. Carla Corp. issued $19,300,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company’s investment banker estimates they would have been sold at 95. 2. Sarasota Company issued $19,300,000 par value 10% bonds at 98. One detachable stock purchase warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $4.

3. Suppose Sepracor, Inc. called its convertible debt in 2017. Assume the following related to the transaction. The 11%, $9,700,000 par value bonds were converted into 970,000 shares of $1 par value common stock on July 1, 2017. On July 1, there was $56,000 of unamortized discount applicable to the bonds, and the company paid an additional $79,000 to the bondholders to induce conversion of all the bonds.

The company records the conversion using the book value method.

Answer 1