4. On January 1, 20x1, Patience Co. issued 10%, 3-year,P2,000,000 convertible bonds at 105. Each P1,000 bond isconvertible into 8 shares with par value per share of P100.Principal is due on December 31, 20x3, while interest is due annually every year-end. On issuance date, the bonds wereselling at a yield to maturity market rate of 12% without theconversion option. All the bonds were converted into equityon December 31, 20x2. Patience Co. incurred stock issuancecosts of P20,000.Requirement: Provide all the journal entries in 20x1 and 20x2.

A journal entry is used to record a commercial transaction in the accounting records of a…

1SS 4. On January 1, 20x1, Patience Co. P2,000,000 convertible bonds at 105. Each P1,000 bond is convertible into 8 shares with par value per share of P100. Principal is due on December 31, 20x3, while interest is due

1SS 4. On January 1, 20x1, Patience Co. P2,000,000 convertible bonds at 105. Each P1,000 bond is convertible into 8 shares with par value per share of P100. Principal is due on December 31, 20x3, while interest is due

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 7EA: On Jan. 1, Year 1, Foxcroft Inc. issued 100 bonds with a face value of $1,000 for $104,000. The...

See similar textbooks

Similar questions

Huang Inc. issued 100 bonds with a face value of $1,000 and a 5-year term at $960 each. The journal entry to record this transaction includes ________. A. a debit to Bonds Payable for $100,000 B. a debit to Discount on Bonds Payable for $4,000 C. a credit to cash for $96,000 D. a credit to Discount on Bonds Payable for $4,000
On Jan. 1, Year 1, Foxcroft Inc. issued 100 bonds with a face value of $1,000 for $104,000. The bonds had a stated rate of 6% and paid interest semiannually. What is the journal entry to record the issuance of the bonds?
2. On January 1, 20X1, Toy inc. Issued $500,000 of convertible bonds. The bonds mature on December 31, 20X5, Interest is payable annually at 6.0% on December 31. The bonds are convertible at the investor's option at the rate of 20 common shares for each $1,000 bond. Similar bonds without the conversion option were selling for $475,000 at time of issuance. Transaction costs of $10,000 were incurred. Required Prepare the journal entry to record the issuance of the bonds.
5. On January 1, 20x1, Kindness Co. issued 3-year, 10%, P2,000,000 convertible bonds for P2,200,000. Principal is due at maturity but interest is payable every year-end. The bonds are convertible into 6,000 ordinary shares with par value per share of P200. On issuance date, the prevailing market rate of interest for similar debt without a conversion feature was 12%. On December 31, 20x2, Kindness Co. retired all the bonds for P2,000,000. On retirement date, the current rate for similar debt instrument without a conversion feature was 11%. Requirement: Provide all the entries in 20x1 and 20x2.
On January 1, 20x1, ELABORATE COMPLICATED Co. issued 3-year, 10%, P4,000,000 convertible bonds for P4,400,000. Principal is due at maturity but interest is payable every year-end. The bonds are convertible into 6,000 ordinary shares with par value of P400. At issuance date, the prevailing market rate of interest for similar debt without conversion feature is 12%. On December 31, 20x2, all the convertible bonds were retired for P4,000,000. The prevailing rate of interest on a similar debt instrument as of December 31, 20x2 is 11% without the conversion feature. How much is gain (loss) on the extinguishment of the bonds on December 31, 20x2?
E On January 1, 20x1, Kindness Co. issued 3-year, 10%, P2.000,000 convertible bonds for P2,200,000. Principal is due at maturity but interest is payable every year-end. The bonds are convertible into 6,000 ordinary shares with par value per share of P200. On issuance date, the prevailing market rate of interest for sinmilar debt without a conversion feature was 12%. On December 31, 20x2, Kindness Co. retired all the bonds for P2,000,000. On retirement date, the current rate for similar debt instrument without a conversion feature was 11%. Requirement: Provide all the entries in 20x1 and 20x2.
Mae Jong Corp. issues $1,000,000 of 10% bonds payable which may be converted into 10,000 shares of $2 par value ordinary shares. The market rate of interest on similar bonds is 12%. Interest is payable annually on December 31, and the bonds were issued for total proceeds of $1,000,000. In accounting for these bonds, Mae Jong Corp. will: a. first assign a value to the equity component, then determine the liability component. b. assign no value to the equity component since the conversion privilege is not separable from the bond. c. first assign a value to the liability component based on the face amount of the bond. d. use the “with-and-without” method to value the compound instrument.
Kk.342.
Ma3. 24 y Company issued $100,000, 6% bonds on January 1, Year 1 at 103. Each $1,000 bond included 20 detachable stock warrants. Each warrant allowed the holder to purchase one share of y Company’s $1 par value common stock for $20 per share. On the date of issue, each warrant had a fair value of $5 per warrant. The entry to record the issue of the bonds would include A debit to discount on bonds payable for $7,000 A debit to cash for $143,000 A credit to paid-in capital, stock warrants for $40,000 A credit to premium on bonds payable for $3,000
Stonewall Corporation issued $12,000 of 5%, 10-year convertible bonds. Each $1,000 bond is convertible to 10 shares of common stock (par $50) of Stonewall Corporation. The bonds were sold at 105 on January 1.
At the beginning of current year, Case Company issued P5,000,000 of 12% nonconvertible bonds payable at 103 which In addition, each P1,000 bond was issued with 30 detachable share warrants, each of which entitled the bondholder t purchase, for P50, one ordinary share of Case. Company, par On the date of issuance, the quoted market value of each warrant was P4. The market value of the bonds ex-warrants Problem 7-11 (AICPA Adapted) are due in five years. to value P25. at the time of issuance is 95. 1. What is the carrying amount of the bonds payable date of issuance? on the a. 5,000,000 b. 4,750,000 c. 5,150,000 d. 4,550,000 2. What amount of the proceeds from the bond issue should be recognized as an increase in shareholders' equity? a. 600,000 b. 300,000 c. 200,000 d. 400,000 3. What amount is credited to share premium if all of the share warrants are exercised? a. 4,350,000 b. 3,750,000 c. 4,150,000 d.
12. On 1/1/21, AB Company sold $100,000, 10%, 10 year bonds at 96. Complete the entries for the bond issuance and the first year interest accrual (including amortization of the discount). Account Debit Credit