Question

Prepare journal entries to record the following transactions relating to long-term bonds of Hopeful Care Inc. (Show computations.)

(a)   On January 1, 2020, Hopeful Care Inc. issued $8,000,000, 6% convertible bonds for $7,840,000. Interest is payable annually on January 1 with the bonds maturing on January 1, 2030.

(b)   On January 1, 2025, HC Inc. bonds had a carrying value of $7,920,000 (Bond Payable is $8,000,000 and Discount on Bond Payable is $80,000) when all the bondholders decided to convert the bonds into common stock. Each $1,000 bond is convertible into 100 shares of $5 par value common stock.

Date

Account Title and Description

Debit

Credit

Answer 1

Journal Entries Date Account Title and Explaination Debit Credit Post. Ref. $ $ 7,840,000.00 160,000.00 Cash Discount on Bonds Payable Bonds Payable (To record issue of 6% Convertible bonds) $ 8,000,000.00 (b) $ 8,000,000.00 Bonds Payable Discount on Bonds Payable Common Stock ($8000000/1000x100x$5) Paid In Capital in Excess of Par - Common Stock (To record conversion of Bonds into Common Stock) $ $ $ 80,000.00 4,000,000.00 3,920,000.00