Bradley-Link’s December 31, 2018, balance sheet included the
following items:
Long-Term Liabilities | ($ in millions) |
9.0% convertible bonds, callable at 103 beginning in
2019, due 2022 (net of unamortized discount of $2) [note 8] |
$148 |
11.0% registered bonds callable at 106 beginning in 2028, due 2032 (net of unamortized discount of $1) [note 8] |
69 |
Shareholders’ Equity | 5 |
Equity—stock warrants |
Note 8: Bonds (in part)
The 9.0% bonds were issued in 2005 at 98.0 to yield 10%. Interest
is paid semiannually on June 30 and December 31. Each $1,000 bond
is convertible into 40 shares of the Company’s no par common
stock.
The 11.0% bonds were issued in 2009 at 104 to yield 10%. Interest
is paid semiannually on June 30 and December 31. Each $1,000 bond
was issued with 40 detachable stock warrants, each of which
entitles the holder to purchase one share of the Company’s no par
common stock for $20, beginning 2019.
On January 3, 2019, when Bradley-Link’s common stock had a market
price of $27 per share, Bradley-Link called the convertible bonds
to force conversion. 90% were converted; the remainder were
acquired at the call price. When the common stock price reached an
all-time high of $32 in December of 2019, 40% of the warrants were
exercised.
Required:
1. Prepare the journal entries that were recorded when
each of the two bond issues was originally sold in 2005 and
2009.
2. Prepare the journal entry to record (book value
method) the conversion of 90% of the convertible bonds in January
2019 and the retirement of the remainder.
3. Assume Bradley-Link induced conversion by
offering $150 cash for each bond converted. Prepare the journal
entry to record (book value method) the conversion of 90% of the
convertible bonds in January 2019.
4. Assume Bradley-Link induced conversion by
modifying the conversion ratio to exchange 45 shares for each bond
rather than the 40 shares provided in the contract. Prepare the
journal entry to record (book value method) the conversion of 90%
of the convertible bonds in January 2019.
5. Prepare the journal entry to record the
exercise of the warrants in December 2019.
($ in millions) | ($ in millions) | |
1) | Debit | Credit |
Convertible Bonds – 2005 issue | ||
Cash(98% x $150 million) | $147.00 | |
Discount on bonds (difference) | $3.00 | |
Convertible bonds payable (face amount) | $150.00 | |
Bonds With Warrants – 2009 issue | ||
Cash(104% x $70million) | $72.80 | |
Discount on bonds payable (difference) | $2.20 | |
Convertible bonds payable (face amount) | $70.00 | |
Equity – stock warrants (given) | $5.00 | |
2) | ||
Convertible bonds payable (90% x $150 million) | $135.00 | |
Discount on bonds payable (90%x $2 million) | $1.80 | |
Common stock (to balance) | $133.20 | |
Convertible bonds payable (10% x $150 million x ) | $15.00 | |
Loss on early extinguishment (to balance) | $0.65 | |
Discount on bonds payable (10%x $2 million) | $0.20 | |
Cash (103% x $150 M x 10%) | $15.45 | |
3) | ||
Convertible bonds payable (90% x $150 million) | $135.00 | |
Conversion expense (90% x 150,000 bonds x $150) | $20.25 | |
Discount on bonds payable (90%x $2 million) | $1.80 | |
Common stock (to balance) | $133.20 | |
Cash (90% x 150,000 bonds x $150) | $20.25 | |
4) | ||
Convertible bonds payable (90% x $150 million) | $135.00 | |
Conversion expense (90% x [150,000 x (45 – 40) shares] x $32 | $21.60 | |
Discount on bonds payable (90%x $2 million) | $1.80 | |
Common stock (to balance) | $154.80 | |
5) | ||
Cash(40% x 70,000 x 40 warrants x $25) | $28.00 | |
Equity – stock warrants (40% x $5 million) | $2.00 | |
Common stock(to balance) | $30.00 | |
Bradley-Link’s December 31, 2018, balance sheet included the following items: Long-Term Liabilities ($ in millions) 9.0%...
Bradley-Link’s December 31, 2018, balance sheet included the following items: Long-Term Liabilities ($ in millions) 10.0% convertible bonds, callable at 102 beginning in 2019, due 2022 (net of unamortized discount of $4) [note 8] $296 11.0% registered bonds callable at 104 beginning in 2028, due 2032 (net of unamortized discount of $2) [note 8] 50 Shareholders’ Equity 5 Equity—stock warrants Note 8: Bonds (in part) The 10.0% bonds were issued in 2005 at 98.0 to yield 10%. Interest is paid...
Bradley-Link’s December 31, 2018, balance sheet included the following items: Long-Term Liabilities ($ in millions) 10.0% convertible bonds, callable at 105 beginning in 2019, due 2022 (net of unamortized discount of $4) [note 8] $296 11.0% registered bonds callable at 108 beginning in 2028, due 2032 (net of unamortized discount of $2) [note 8] 67 Shareholders’ Equity 7 Equity—stock warrants Note 8: Bonds (in part) The 10.0% bonds were issued in 2005 at 98.0 to yield 10%. Interest is paid...
Bradley-Link’s December 31, 2021, balance sheet included the following items: Long-Term Liabilities ($ in millions) 8.0% convertible bonds, callable at 102 beginning in 2022, due 2025 (net of unamortized discount of $3) [note 8] $147 8.8% registered bonds callable at 105 beginning in 2031, due 2035 (net of unamortized discount of $1) [note 8] 64 Shareholders’ Equity 6 Equity—stock warrants Note 8: Bonds (in part) The 8.0% bonds were issued in 2008 at 94.0 to yield 10%. Interest is paid...
Bradley-Link’s December 31, 2021, balance sheet included the following items: Long-Term Liabilities ($ in millions) 7.0% convertible bonds, callable at 102 beginning in 2022, due 2025 (net of unamortized discount of $4) [note 8] $196 7.8% registered bonds callable at 105 beginning in 2031, due 2035 (net of unamortized discount of $2) [note 8] 65 Shareholders’ Equity 5 Equity—stock warrants Note 8: Bonds (in part) The 7.0% bonds were issued in 2008 at 97.0 to yield 10%. Interest is paid...
Bradley-Link's December 31, 2021, balance sheet included the following items: ($ in millions) Long-Term Liabilities 9.0% convertible bonds, callable at 104 beginning in 2022, due 2025 (net of unamortized discount of $5) [note $195 9.8% registered bonds callable at 107 beginning in 2031, due 2035 (net of unamortized discount of $1) [note 66 Shareholders' Equity Equity-stock warrants Note 8: Bonds (in part) The 9.0% bonds were issued in 2008 at 94.0 to yield 10%. Interest is paid semiannually on June...
Bradley-Link's December 31, 2021, balance sheet included the following items: ($ in millions) $245 Long-Term Liabilities 11.0t convertible bonds, callable at 102 beginning in 2022, due 2025 (net of unamortized discount of $5) (note 8] 11.88 registered bonds callable at 105 beginning in 2031, due 2035 (net of unamortized discount of $1) [note 8) Shareholders' Equity Equity-stock warrants Note 8: Bonds (in part) The 11.0% bonds were issued in 2008 at 96.0 to yield 10%. Interest is paid semiannually on...
Bradley-Link's December 31, 2021, balance sheet included the following items: ($ in millions) Long-Term Liabilities 9.0% convertible bonds, callable at 103 beginning in 2022, due 2025 (net of unamortized discount of $5) [note 8] 9.8% registered bonds callable at 106 beginning in $195 2031, due 2035 (net of unamortized discount of $2) [note 8 Shareholders' Equity 6 Equity-stock warrants LE Note 8: Bonds (in part) The 9.0% bonds were issued in 2008 at 96.0 to yield 10%. Interest is paid...
Bradley-Link's December 31, 2018, balance sheet included the following items: ($ in millions) $296 Long-Term Liabilities 10.01 convertible bonds, callable at 102 beginning in 2019, due 2022 (net of unamortized discount of $4) (note 8] 11.01 registered bonds callable at 104 beginning in 2028, due 2032 (net of unamortized discount of $2) (note 8] Shareholders' Equity Equity stock warrants Note 8: Bonds (in part) The 100% bonds were issued in 2005 at 98 0 to yield 10%. Interest is paid...
Bradley-Link's December 31, 2018, balance sheet included the following items: ($ in millions) $196 Long-Term Liabilities 9.0% convertible bonds, callable at 103 beginning in 2019, due 2022 (net of unamortized discount of $4) (note 8] 11.0% registered bonds callable at 106 beginning in 2028, due 2832 (net of unamortized discount of $2) (note 8] Shareholders' Equity Equity-stock warrants points eBook Print Note 8: Bonds (in part) The 9.0% bonds were issued in 2005 at 97.5 to yield 10%. Interest is...
Bradley-Link's December 31, 2021, balance sheet included the following items: ($ in millions) $196 Long-Term Liabilities 11.08 convertible bonds, callable at 101 beginning in 2022, due 2025 (net of unamortized discount of $4) [note 8) 11.8% registered bonds callable at 104 beginning in 2031, due 2035 (net of unamortized discount of $1) [note 8] Shareholders' Equity Equity-stock warrants Note 8: Bonds (in part) The 11.0% bonds were issued in 2008 at 97.0 to yield 10%. Interest is paid semiannually on...