Homework Answers
| Required 1) | ||
| Account Title and Explanation | Debit | Credit |
| Bonds payable | $ 3,042,345 | |
| Contributed surplus | $ 156,290 | |
| Common shares ($3,042,345 +$ 156,290 ) | $ 3,198,635 | |
| (To record to convert their bonds into common shares on July 1,2021 voluntarily ) | ||
| Required 2) | ||
| Account Title and Explanation | Debit | Credit |
| Bonds payable | $ 3,042,345 | |
| Loss on redemption of bonds ( see note 1 ) | $ 17,655 | |
| Contributed surplus | $ 156,290 | |
| Retained Earnings (see note 2 ) | $ 17,445 | |
| Common shares (3,042,345 +17,655+156,290+17,445)-35,100 ) | $ 3,198,635 | |
| Cash | $ 35,100 | |
| (To record to convert their bonds into common shares on July 1,2021 ) | ||
| Note 1 : | ||
| To calculate the Loss on redemption of bonds : | ||
| Particulars | Amounts ($) | |
| Fair value of bonds | $ 3,060,000 | |
| less: Carrying value of bonds | ($ 3,042,345) | |
| Loss on redemption of bonds | $ 17,655 | |
| To Calculate Amounts transferred to the Retained earnings | ||
| Incentive paid to bondholders | $ 35,100 | |
| less: Loss on redemption of bonds | ($ 17,655) | |
| Amount transferred to Retained earnings | $ 17445 |
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