Question

On January 1, 2021, Fowl Products issued $77 million of 7%, 10-year convertible bonds at a net price of $78.3 million. Fowl recently issued similar, but nonconvertible, bonds at 97 (that is, 97% of face amount). The bonds pay interest on June 30 and December 31 Each $1,000 bond is convertible into 25 shares of Fowl's no par common stock. Fowl records interest by the straight-line method. On June 1, 2023, Fowl notified bondholders of its intent to call the bonds at face value plus a 2% call premium on July 1, 2023. By June 30 all bondholders had chosen to convert their bonds into shares as of the interest payment date. On June 30, Fowl paid the semiannual interest and issued the requisite number of shares for the bonds being converted,

Answer 1

	Accounts Title	Debit	Credit
1)	Cash	78,300,000
Event 1	Convertible Bonds Payable (88000000*98/100)		74,690,000
	Equity-Conversion option		3,610,000
2)	Interest expenses	2,810,500
Event 1	Convertible Bonds payable (2,310,000/20 period)	115,500
	Cash (77000000*3.5%)		2,695,000
	Discount on Bonds Payable (77000000-74,690,000) = 2,310,000
3)
Event 1	Interest expenses	2,810,500
	Convertible Bonds payable (2,310,000/20 period)	115,500
	Cash (77000000*3.5%)		2,695,000
2)	Convertible Bonds payable	75,267,500
	Equity-Conversion option	3,610,000
	Common Stock		78,877,500
	Working
	Convertible Bonds payable	74,690,000
	Add: Amortization for 5 period (115,500*5)	577,500
	Balance at converiosn	75,267,500