Question

Question 2 --/11 View Policies Current Attempt in Progress On January 1, 2020, Splish Corporation issued a series of 500 convertible bonds, maturing in five years. The face amount of each bond was $1,000. Splish received $524,000 for the bond issue. The bonds paid interest every December 31 at 6%; the market interest rate for bonds with a comparable level of risk was 5%. The bonds were convertible to common shares at a rate of ten common shares per bond. Splish amortized bond premiums and discounts using the effective interest method, and the company's year-end was December 31. On January 1, 2021, 100 of the bonds were converted into common shares. On June 30, 2021, another 100 bonds were converted into common shares. The bondholders chose to forfeit the accrued interest on these bonds. On January 1, 2022, when the fair value of the bonds was $308,800 due to a decrease in market interest rates, a conversion inducement of $16/bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 300 bonds were converted into common shares at this time. Prepare all required journal entries to record the above transactions. (Hint: don't forget to accrue interest and amortize the premium on the bond at year- end, if needed). (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020 Cash 524,000 Bonds Payable Contributed Surplus - Conversion Rights

Answer 1

Date	Accounts title and explanation	Debit	Credit
Jan. 1, 2020	Cash	524000
	Bonds payable (500000*0.78353)+(500000*6%*4.32948)		521649
	Contributed surplus – conversion rights		2351
Dec. 31, 2020	Interest expense (521649*5%)	26082
	Bonds payable	3918
	Cash (500000*6%)		30000
Jan. 1, 2021	Bonds payable (521649-3918)*100/500	103546
	Contributed surplus – conversion rights (2351*100/500)	470
	Common shares		104016
Jun. 30, 2021	Bonds payable (521649-3918)*100/500	103546
	Contributed surplus – conversion rights ((2351-470)*100/400)	470
	Interest expense ((521649-3918)*5%*6/12*100/400)	3236
	Common shares		107252
Dec. 31, 2021	Interest expense (521649-3918-103546-103546)*5%	15532
	Bonds payable	2468
	Cash (500000-100000-100000)*6%		180000
Jan. 1, 2022	Bonds payable (521649-3918-103546-103546-2468)	308171
	Loss on redemption (308800-308171)	629
	Contributed surplus – conversion rights (2351-470-470)	1411
	Retained earnings (4800-629)	4171
	Common shares (308171+1411)		309582
	Cash (500-100-100)*16		4800