Question

ch.19 Topical Assignment 1. Originally issued $4,000,000 in bonds at $4,400,000 but have amortized $160,000 of the premium since issuance. We wish to retire 70% of the bond issue at the current market price of 120. Make the necessary entry to retire the bonds. 2. Originally issued $1,000,000 in bonds and current premium balance is $40,000. Each $1,000 bond converts to 10 shares of $5 par common stock. Current market value of stock is $120 per share. If all 1,000 bonds are converted to common stock, prepare the necessary entry.

Answer 1

S.No.	Account Titles	Debit $	Credit $
1	Bonds Payable (4,000,000 x 70% )	2,800,000
	Premium on Bond (400,000 - 160,000 ) x 70%	168,000
	Loss on Bond redemption	392,000
	Cash ( 4,000,000 x 70% x 120% )		3,360,000
2	Bond Payable	1,000,000
	Premium on Bond	40,000
	Loss on Bond redemption	160,000
	Common Stock ( 1,000,000 / 1,000 ) x 10 x 5		50,000
	Paid in Capital in excess of par-Common Stock		1,150,000
	( 1,000,000 / 1,000 ) x 10 x 115