Question

Please help with the Bradley question below. I don't understand how to do the journal entries for the problem. Thank you.

Bradley-Link's December 31, 2021, balance sheet Included the following items: ($ in millions) $196 In 2013 Long-Term Liabilities 8.6% convertible bonds, callable at 182 beginning in 2022, due 2025 (net of unamortized discount of $4) note 81 8.8% registered bonds callable at 105 beginning in 2031, due 2835 (net of unamortized discount of $1) (note 8] Shareholders' Equity Equity-stock warrants 195 begr 54) Note 8: Bonds (in part) The 8.0% bonds were issued in 2008 at 96.0 to yield 10%. Interest is pald semiannually on June 30 and December 31. Each $1.000 bond is convertible Into 50 shares of the Company's no par common stock. The 8.8% bonds were issued In 2012 at 103 to yield 10%. Interest is pald semiannually on June 30 and December 31. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitles the holder to purchase one share of the Company's no par common stock for $30, beginning 2022 On January 3, 2022, when Bradley-Link's common stock had a market price of $37 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 $42 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 $170 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 modifying the conversion ratio to exchange 55 shares for each bond rather than the 50 shares provided in the contract. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds In January 2022 5. Prepare the journal entry to record the exercise of the warrants in December 2022

Answer 1

	Below Answer complete based on BOND + Equity Warrant
	Please see step by step analysis along with Journal Entries
	Long term Liability	Amnt($ Mio)
	8% convertible Bond
	callable at 102 begining at 2022	196
	due on 2025( Net of unamortized cost $4)
	8.8% registered Bond
	callable at 105 begining at 2031
	due on 2035( Net of unamortized cost $1)	61
	Shareholders Equity	7
	( Equity Stock Warrant)
	BOND note
	The 8% bond were issued in 2008 at 96 to Yield 10% Interest
	is paid semi annually on June 30 and dec 31
	Each $ 1000 bond convertible into 50 shares
	The 8.8% bond were issued in 2012 at 103 to Yield 10% Interest
	is paid semi annually on June 30 and dec 31
	Each $ 1000 bond convertible into 50 detachable stock warrant
	Holder to purchase one share of the Company's No par
	common stock for $ 30 @ opening 2022
	Journal Entries to account above Multiple Bond
	The 8% bond were issued in 2008 at 96 to Yield 10% Interest
	is paid semi annually on June 30 and dec 31
	Each $ 1000 bond convertible into 50 shares
	Details	Debit($Mio)	Credit($ Mio)
	Cash (96% of $ 200 Mio	192
	Discount on Bond Payable - ( balancing Number)	8
	Bond Payable ( $ 196+$4)		200
	In second case of BOND 8.8% Registered Bond
	Cash (103% of $ 62 Mio	63.86
	Discount on Bond Payable ( balancing Number)	5.14
	Bond Payable ( $ 61+$1)		62
	( Equity Stock Warrant)		7
	Third part - talking about conversion At Market price $ 37
	Bradly Link plan to converti 90%
	Bond Payable ( $ 196+$4)*90%	180
	Discount on Bond Payable -$ 4 Mio*90%		3.6
	Cash ( balancing Number)		176.4
	Balance 10% of convertible Bond
	Bond Payable ( $ 196+$4)*10%	20
	Loss due to retirement ( Balancing Number)	0.8
	Discount on Bond Payable -$ 4 Mio*10%		0.4
	Cash -102%*10%*$200		20.4
Answer 3	Assume Bradley Link induced conversion by offering $ 170
	cash for each Bond converted
	Journal entry to recorded Book Value Method
	The conversion of 90%
	Bond Payable ( $ 196+$4)*90%	180
	Conversion Expense-90% * 200000 Shares *Offer price $170	30.6
	Discount on Bond Payable -$ 4 Mio*90%		3.6
	Cash - 90% * 200000 Shares *Offer price $170		30.6
	common Stock - Balancing Number		176.4
	How to derived Number of shares
	callable at 102 begining at 2022	196
	due on 2025( Net of unamortized cost $4)
	Carrying Value $-A	19,60,00,000
	Discount on Bonds$-B	40,00,000
	Face Value of Bond$-C	1,000
	Number of BOND= (A+B)/C	2,00,000
Answer 4	Assume Bradley Link induced conversion by modifying
	the convertion ratio to exchange 55 shares for each Bond
	rather than 50 shares @ market price $37
	Again we need to calculatd Conversion Expenses
	90% * 200000 Shares *Exchange Share (55-50)*$37
	90%*200000*(55-50)*37= 33300000	33
	Bond Payable ( $ 196+$4)*90%	180
	Conversion Expense- as above	33
	Discount on Bond Payable -$ 4 Mio*90%		3.6
	common Stock - Balancing Number		209
Answer 5	Finally Journal entry relates Exercise of Warrant Dec 2019
	As per Question - Each $ 1000 BOND was issued with 50 detachable
	Stock warrants . Common stcok $ 30 begining 2022
	Determined cash received
	40%* (50* $ 1000)*50 * $30= 30000000	30
	Cash	30
	Equity Stock Warrant-40%*$7	3
	Common Stock		33