Homework Answers
Answer:-
GAAP requires that the entire issue price of convertible bonds be recorded as debt, precisely the sameway, in fact, as for nonconvertible bonds.
Cash (102% × $85 million) = $86.7 million.
The journal entry to record the issuance of the bond.
|
Event |
General Journal |
Debit |
Credit |
|
1 |
Cash A/c [$85 Million x 102%] |
86.7 |
|
|
To Premium on Bonds Payable A/c [$86.7 Million - $85 Million] |
1.7 |
||
|
To convertible Bond Payable A/c [$85 Million] |
85.0 |
||
|
[Journal entry to record the issuance of Bond |
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