1. 2. 3. 1. 2. On August 1, 2025, Lane Corporation called its 10% convertible bonds for conversion. The $8,000,000 par bonds were converted into 320,000 shares of $20 par common stock. On August 1, there was $800,000 of the unamortized premium applicable to the bonds. The fair value of the common stock was $20 per share. Ignore all interest payments. No. Account Titles and Explanation 3. Packard, Inc. decides to issue convertible bonds instead of common stock. The company issues 10% convertible bonds, par $4,000,000, at 97. The investment banker indicates that if the bonds had not been convertible, they would have sold at 94. Gomez Company issues $9,000,000 of bonds with a coupon rate of 8%. To help the sale, detachable stock warrants are issue at the rate of ten warrants for each $1,000 bond sold. It is estimated that the value of the bonds without the warrants is $8,883,000 and the value of the warrants is $567,000. The bonds with the warrants sold at 101. Bonds Payable Premium on Bonds Payable Common Stock Paid-in Capital in Excess of Par - Common Stock Cash Discount on Bonds Payable Bonds Payable Cash Discount on Bonds Payable Bonds Payable Paid-in Capital-Stock Warrants Debit 8000000 800000 Credit 6400000 2400000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
1.
2.
3.
1.
2.
On August 1, 2025, Lane Corporation called its 10% convertible bonds for conversion. The $8,000,000 par bonds were
converted into 320,000 shares of $20 par common stock. On August 1, there was $800,000 of the unamortized premium
applicable to the bonds. The fair value of the common stock was $20 per share. Ignore all interest payments.
No. Account Titles and Explanation
3.
Packard, Inc. decides to issue convertible bonds instead of common stock. The company issues 10% convertible bonds, par
$4,000,000, at 97. The investment banker indicates that if the bonds had not been convertible, they would have sold at 94.
Gomez Company issues $9,000,000 of bonds with a coupon rate of 8%. To help the sale, detachable stock warrants are issued
at the rate of ten warrants for each $1,000 bond sold. It is estimated that the value of the bonds without the warrants is
$8,883,000 and the value of the warrants is $567,000. The bonds with the warrants sold at 101.
Bonds Payable
Premium on Bonds Payable
Common Stock
Paid-in Capital in Excess of Par - Common Stock
Cash
Discount on Bonds Payable
Bonds Payable
Cash
Discount on Bonds Payable
Bonds Payable
Paid-in Capital-Stock Warrants
Debit
8000000
800000
Credit
6400000
2400000
Transcribed Image Text:1. 2. 3. 1. 2. On August 1, 2025, Lane Corporation called its 10% convertible bonds for conversion. The $8,000,000 par bonds were converted into 320,000 shares of $20 par common stock. On August 1, there was $800,000 of the unamortized premium applicable to the bonds. The fair value of the common stock was $20 per share. Ignore all interest payments. No. Account Titles and Explanation 3. Packard, Inc. decides to issue convertible bonds instead of common stock. The company issues 10% convertible bonds, par $4,000,000, at 97. The investment banker indicates that if the bonds had not been convertible, they would have sold at 94. Gomez Company issues $9,000,000 of bonds with a coupon rate of 8%. To help the sale, detachable stock warrants are issued at the rate of ten warrants for each $1,000 bond sold. It is estimated that the value of the bonds without the warrants is $8,883,000 and the value of the warrants is $567,000. The bonds with the warrants sold at 101. Bonds Payable Premium on Bonds Payable Common Stock Paid-in Capital in Excess of Par - Common Stock Cash Discount on Bonds Payable Bonds Payable Cash Discount on Bonds Payable Bonds Payable Paid-in Capital-Stock Warrants Debit 8000000 800000 Credit 6400000 2400000
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