Question

Shamrock Inc. issued $3,180,000 of convertible 10-year bonds on July 1, 2020. The bonds provide for 13% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $54,000, which is being amortized monthly on a straight-line basis. The bonds are convertible after one year into 8 shares of Shamrock Inc.'s $100 par value common stock for each $1,000 of bonds. On August 1, 2021, $318,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash. Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates. (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.) (a) August 1, 2021. (Assume the book value method is used.) (b) August 31, 2021. (c) December 31, 2021, including closing entries for end-of-year.

Answer 1

Pantheulaus. 1 2021 dy. 450 458 Interest expence alc to discount on bonds. (being discount on bonds amorised) 3445 dy. 6390 3445 B7 Interest expense gle to Bondholders alc. ( being Interest of 13%. fou 1 month made due ons 316000 bonds). dy. 3445 344 Bondholders al to cash alc. (being interest paid to dondholdens) d y. 318000 254400 63600 13%. Bonds alc to common stock to paid in capital in excess (being &318000 bonds being converted into $25 4400 conmonstock des 405 405 Interest Expense alc to Discount on Bonds. ( being xiscount on bonds Tompatised)

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