For each of the unrelated transactions described below, present
the entries required to record each transaction.
1. | Culver Corp. issued $18,000,000 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. | Larkspur Company issued $18,000,000 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 $5. | |
3. | Suppose Sepracor, Inc. called its convertible debt in 2017. Assume the following related to the transaction. The 11%, $11,000,000 par value bonds were converted into 1,100,000 shares of $1 par value common stock on July 1, 2017. On July 1, there was $52,000 of unamortized discount applicable to the bonds, and the company paid an additional $68,000 to the bondholders to induce conversion of all the bonds. The company records the conversion using the book value method. |
(Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
No. |
Account Titles and Explanation |
Debit |
Credit |
1. |
|||
2. |
|||
3. |
|||
Answer | |||
Date |
Account title and Explanation | Debit | Credit |
1 | Cash | $ 1,78,20,000 | |
Discount on Bonds Payable | $ 1,80,000 | ||
Bond Payable | $ 1,80,00,000 | ||
(To record issue of bond) | |||
2 | Cash(18000000*.98) | $ 1,76,40,000 | |
Discount on Bonds Payable | $ 12,60,000 | ||
Bond Payable | $ 1,80,00,000 | ||
Paid-in Capital—Stock Warrants(180000*5) | $ 9,00,000 | ||
(To record issue of bonds) | |||
3 | Debt Conversion Expense | $ 68,000 | |
Bonds Payable | $ 1,10,00,000 | ||
Discount on Bonds Payable | $ 52,000 | ||
Common Stock | $ 10,50,000 | ||
Paid-in Capital in Excess of Par | $ 98,98,000 | ||
Cash | $ 68,000 |
For each of the unrelated transactions described below, present the entries required to record each transaction....
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