AMC Limited issued five-year, 5% bonds for their par value of $820,000 on 1 January 20X1. Interest is paid annually. The bonds are convertible to common shares at a rate of 50 common shares for every $1,000 bond. (PV of $1. PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1. Assume that the bonds were convertible at the investor's option and that the conversion option was valued at $67,240. a. Provide the journal entry on issuance. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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Chapter1: Financial Statements And Business Decisions
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AMC Limited issued five-year, 5% bonds for their par value of $820,000 on 1 January 20X1. Interest is paid annually. The bonds are
convertible to common shares at a rate of 50 common shares for every $1,000 bond.
(PV of $1. PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)
Required:
1. Assume that the bonds were convertible at the investor's option and that the conversion option was valued at $67,240.
a. Provide the journal entry on issuance. (If no entry is required for a transaction/event, select "No journal entry required" in the first
account field.)
Answer is complete and correct.
No
Transaction
General Journal
Debit
Credit
1
1
Cash
820,000 O
Discount on bonds payable
67,240 O
Bonds payable
820,000
Contributed
common share conversion
67,240
Transcribed Image Text:AMC Limited issued five-year, 5% bonds for their par value of $820,000 on 1 January 20X1. Interest is paid annually. The bonds are convertible to common shares at a rate of 50 common shares for every $1,000 bond. (PV of $1. PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1. Assume that the bonds were convertible at the investor's option and that the conversion option was valued at $67,240. a. Provide the journal entry on issuance. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is complete and correct. No Transaction General Journal Debit Credit 1 1 Cash 820,000 O Discount on bonds payable 67,240 O Bonds payable 820,000 Contributed common share conversion 67,240
b. Calculate interest expense for each year of the bond's five-year life. Use an interest rate of 7% for this requirement. (Round your
intermediate calculations and final answers to the nearest whole dollar.)
X Answer is not complete.
Beginning
balance
Interest
Ending
Balance
Assignment
Payment
@7%
1
$ 752,760 O $ 52,693 O $ (41,000) X $ 764,453
2
$ 764,453
$ 53,512 O $ (41,000) X S 776,965
3
$ 776,965
$ 54,388 O $ (41,000) X S 790,352 X
4
2$
790,352 X $ 55,325 O $ (41,000) X $ 804,677
$
804,677
56,322 X
(861,000)
Transcribed Image Text:b. Calculate interest expense for each year of the bond's five-year life. Use an interest rate of 7% for this requirement. (Round your intermediate calculations and final answers to the nearest whole dollar.) X Answer is not complete. Beginning balance Interest Ending Balance Assignment Payment @7% 1 $ 752,760 O $ 52,693 O $ (41,000) X $ 764,453 2 $ 764,453 $ 53,512 O $ (41,000) X S 776,965 3 $ 776,965 $ 54,388 O $ (41,000) X S 790,352 X 4 2$ 790,352 X $ 55,325 O $ (41,000) X $ 804,677 $ 804,677 56,322 X (861,000)
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