Homework Answers
a) The Bond Issue
| 1/2/Yr1 | Bank A/c | Dr | 550,000 | |
| 5% Convertible Bonds A/c | Cr | 500,000 | ||
| Share Premium – Equity Conversion A/c | Cr | 50,000 | ||
| (Being 500 5% convertible bonds issued at a 10% Premium) |
b) The third interest payment
| 6/30/Yr2 | Interest Expense A/c | Dr | 100,000 | |
| Bank A/c | Cr | 100,000 | ||
| (Being third interest payment is made on 6/30/Yr2 and interest expense accounted for) |
c)The conversion of half of the bonds
| 6/30/Yr2 | 5% Convertible Bonds A/c | Dr | 250,000 | |
| Share Premium – Equity Conversion A/c | Dr | 25,000 | ||
| Loss on bond Conversion A/c | Dr | 100,000 | ||
| Equity Share Capital A/c | Cr | 250,000 | ||
| Paid-In Capital in Excess of Par A/c | Cr | 125,000 | ||
| (Being 12,500 shares of face value 20 issued against convertible bonds) |
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