Question

On January 1, 2013, Madison Products issued $55 million of 6%, 10-year convertible bonds at a net price of $55.7 million. Madison recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Madison’s no par common stock. Madison records interest by the straight-line method.

On June 1, 2015, Madison notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2015. By June 30 all bondholders had chosen to convert their bonds into shares as of the interest payment date. On June 30, Madison paid the semiannual interest and issued the requisite number of shares for the bonds being converted.

Required:

Assume that Madison Products prepares its financial statements according to International Financial Reporting Standards.

1.	Prepare the journal entry for the issuance of the bonds by Madison. (Enter your answers in whole dollars. If no entry is required for an event, select "No journal entry required" in the first account field.)

     

2.	Prepare the journal entry for the June 30, 2013, interest payment. (Enter your answers in whole dollars. If no entry is required for an event, select "No journal entry required" in the first account field.)

     

3.	Prepare the journal entries for the June 30, 2015, interest payment by Madison and the conversion of the bonds (book value method). (Enter your answers in whole dollars. If no entry is required for a particular event, select "No journal entry required" in the first account field.)

     

Answer 1

Accounts 7tee Exea raten Oebit Caett Ans Dae Cash AL $55,000,00o to recoad issue af Conertbe bonds at psemiam $ 16 (500 2- Soooo-3Socs 2a3 To Cash $ 1 150 …