Question

Bradley-Link's December 31, 2021, balance sheet included the following items: Long-Term Liabilities 10.0% convertible bonds, callable at 105 beginning in 2022, due 2025 (net of namortized discount of 56) note 8] 10.8% registered bonds callable at 108 beginning in 2031, due 2035 (net of unamortized discount of $2) (note 8) ShareholdersEquity Equity-stock warrants (5 in millions) $294 58 Note 8: Bonds (in part) The 10.0% bonds were issued in 2008 at 970 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of the Company's no por common stock The 10.8% bonds were issued in 2012 at 106 to yield 10% Interest is paid semiannually on June 30 and December 31. Each $1.000 bond was issued with 30 detachable stock warrants, each of which entitles the holder to purchase one share of the Company's no par common stock for $25, beginning 2022 On January 3, 2022, when Bradley-Link's common stock had a market price of $32 per share, Bradley-Link called the convertible bonds to force conversion. 90% were converted, the remainder were acquired at the call price. When the common stock price reached an all-time high of $37 in December of 2022. 40% of the warrants were exercised. Required: 1. Prepare the journal entries that were recorded when each of the two bond issues was originally sold in 2008 and 2012 2. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2022 and the retirement of the remainder. 3. Assume Bradley-Link induced conversion by offering 5140 cash for each bond converted, Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2022 4. Assume Bradley.link induced conversion by modling the conversion ratio to exchance 35 shares for each bond rather than the 30 < Prev 17 of 17 18

Answer 1

1	Particulars	Debit ($ in millions)	Credit ($ in millions)
2008	Cash	291.0
	Discount on Bonds Payable	9.0
	10% Convertible Bonds Payable		300.0
2012	Cash	63.6
	Discount on Bonds Payable	3.4
	10.8 % Bonds Payable		60.0
	Equity Stock Warrants		7.0
Explanation:-
	10% Convertible Bonds issue 2008
	Cash : (97%* $300 million) = $291 million
	10.8% Bonds with Warrants issue 2012
	Cash : (106% * $60 million) = $63.6 million
2	Particulars	Debit ($ in millions)	Credit ($ in millions)
2022	10% Convertible Bonds Payable	270.0
	Discount on Bonds Payable		8.1
	Common Stock		261.9
2022	10% Convertible Bonds Payable	30.0
	Loss on early Extinguishment	2.4
	Discount on Bonds Payable		0.9
	Cash		31.5
Explanation:-
	10% Convertible Bonds Payable : (90% * $ 300 million) = $ 270 millon
	Discount on Bonds Payable : (90% * $ 9 million) = $ 8.1 million
	10% Convertible Bonds Payable : (10% * $ 300 million) = $ 30 millon
	Discount on Bonds Payable : (10% * $ 9 million) = $ 0.9 million
	Cash : (105% * 10% * $ 300 million) = $ 31.5 million
3	Particulars	Debit ($ in millions)	Credit ($ in millions)
2022	10% Convertible Bonds Payable	270.0
	Conversion Expenses	37.8
	Discount on Bonds Payable		8.1
	Common Stock		261.9
	Cash		37.8
Explanation:-
	10% Convertible Bonds Payable : (90% * $ 300 million) = $ 270 millon
	Conversion Expenses : (90% * .300 million * $140) = $ 37.80 millon
	Discount on Bonds Payable : (90% * $ 9 million) = $ 8.1 million
	Cash : (90% * .300 million * $140) = $ 37.80 millon
4	The Question for Point is not complete and lacks full information.