Question

Bradley-Link's December 31, 2021, balance sheet included the following items: ($ in millions) Long-Term Liabilities 9.0% convertible bonds, callable at 103 beginning in 2022, due 2025 (net of unamortized discount of $5) [note 8] 9.8% registered bonds callable at 106 beginning in $195 2031, due 2035 (net of unamortized discount of $2) [note 8 Shareholders' Equity 6 Equity-stock warrants LE Note 8: Bonds (in part) The 9.0% bonds were issued in 2008 at 96.0 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 par common stock The 9.8% bonds were issued in 2012 at 104 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 has 7 A A A

Answer 1

Part 1

Event	General Journal	Debit	Credit
	Record the bond issue that was originally sold in 2005
1	Cash (200*96%)	192
	Discount on bonds payable (balancing figure)	6
	Convertible bonds payable (196+4)		200
	Record the bond issue that was originally sold in 2009
2	Cash (57*104%)	59.28
	Discount on bonds payable (balancing figure)	3.72
	Convertible bonds payable (55+2)		57
	Equity—Stock warrants		6

Part 2

Event	General Journal	Debit	Credit
	Record the conversion of 90% of the convertible bonds
1	Convertible bonds payable (200*90%)	180
	Discount on bonds payable (5*90%)		4.5
	Common Stock (balancing figure)		175.5
	Record the retirement of the remainder bonds
2	Convertible bonds payable (200*10%)	20
	Loss on early extinguishment (balancing figure)	1.1
	Discount on bonds payable (5*10%)		0.5
	Cash (200*10%*103%)		20.6

Part 3

Event	General Journal	Debit	Credit
	Record the conversion of 90% of the convertible bonds
1	Convertible bonds payable (200*90%)	180
	Conversion expense (90%*0.20*150)	27
	Discount on bonds payable (5*90%)		4.5
	Common Stock		175.50
	Cash (90%*0.20*150)		27

Part 4

Event	General Journal	Debit	Credit
	Record the conversion of 90% of the convertible bonds
1	Convertible bonds payable (200*90%)	180
	Conversion expense (90%*(0.20*(35-30))*32)	28.8
	Discount on bonds payable (5*90%)		4.5
	Common Stock (balancing figure)		204.3

Part 5

Event	General Journal	Debit	Credit
	Record the exercise of the warrants
1	Cash (40%*50000*40*32)	25.6
	Equity—Stock warrants (6*40%)	2.4
	Common Stock		28.0