Question

On 31 December 2009, the balance sheet of Gamma Corporation reported bonds outstanding with a face value of $2,000,000 and a related un-amortized premium of $60,000. Interest is payable semiannually on January 1 and July 1. Prepare an entry in journal form with explanations to record the retirement of bonds with a face value of $1,200,000 on January 1 2010, assuming that bonds were redeemed at a call price of 104. Prepare an entry in journal form with explanations on January 1, 2010, to record the conversion of bonds with a fave value of $800,000 into common stock. Each $1000 bond is convertible into 30 shares of $20 par value common stock.  

Answer 1

Transaction	Date	Account Titles	Debit	Credit
			$	$
a.	Jan 1, 2010	Bonds Payable	1,200,000
		Premium on Bonds Payable	36,000
		Loss on Redemption of Bonds	12,000
		Cash		1,248,000
b.	Jan 1, 2010	Bonds Payable	800,000
		Premium on Bonds Payable	24,000
		Common Stock ( 800,000 / 1,000 x 30 x $ 20)		480,000
		Paid-in Capital in Excess of Par: Common Stock		344,000