Question

E16-6 (L01) (Conversion of Bonds) On January 1, 2017, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into eight shares of Gottlieb Corporation $100 par value common stock after December 31, 2018.

On January 1, 2019, $400,000 of debentures are converted into common stock, which is then selling at $110. An additional $400,000 of debentures are converted on March 31, 2019. The market price of the common stock is then $115. Accrued interest at March 31 will be paid on the next interest date.

Bond premium is amortized on a straight-line basis.

NO ATTACHMENTS PLEASE! copy paste table answer

Instructions

Make the necessary journal entries for:

(a) December 31, 2018. (c) March 31, 2019. 


(b) January 1, 2019. (d) June 30, 2019. 


Record the conversions using the book value method.

Answer 1

Dale Answert Journal entries - particulars 2018 Interest expenses All Decal Premium on bonds Ale credit IL A Debit DY $156,000 or $4000 ($4,000,000 (1024,-100%Vioxe] |$160,000 $400,000 6400 $320,000 $86,400 2019 2nteresten $7,800 3200 48000 a To cash $4000,000x 8% x6127 Bonds payable Ale or Premiumon bonds Ale or |C$ 400.000x2%)-( $400.000X2%)40]? 68000- $1600) To common stock LG 4.020,00 1000)x 8 shaves x $100 To paid in capital excess par Interest expenses Ale on premicem on bonds Ale or ($ 400,000 x 98% x 3 20] - TO Interest payable | 400000 x 89 x V2] Bonds payable Ale or premium on bonds Ak $400,000x2y/jor {$400,000x2% x 460) + $2007 ($8000-$1800) To common slocle ($400,007000) 8 shares x100] TO paid in capital excess of par 19 Interest expenses Alc Juned Premium on bonos Ale 1654000000 - $400,000-$400,000)273/20 a. Interest payable Al DY {$400,000 *8% * Vie? To cash. 44,000,000 - $400,000-$400,000) 8%x69+ $80007 $400,000 $6.200 $320000 $ 86200 124.800 $3200 8000 $136,000