Assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2026. Prepare the journal entry to record the conversion. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required select "No Entry" for
Assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2026. Prepare the journal entry to record the conversion. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required select "No Entry" for
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![On July 1, 2023, Pharoah Ltd., which follows ASPE, issued 1,000 convertible, five-year, $1,000 bonds. Each bond is
convertible into 20 common shares at the bondholder's option. On the date of issuance, the bond's conversion rights
were valued at $51,000.
On July 1, 2026, the bonds had a carrying value on Pharoah's books of $969,000, and the fair market value of the bonds
without the convertible option was $973,000.
(a)
Assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2026.
Prepare the journal entry to record the conversion. (Credit account titles are automatically indented
when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for
the account titles and enter 0 for the amounts. List all debit entries before credit entries.)
Account Titles and Explanation
Bonds Payable
Common Shares
Contributed Surplus - Conversion Rights
Debit
Credit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbc6a7273-7680-466f-89c6-36324702eea4%2F7a384a85-2c0b-40d8-9b02-e2cf8b34719f%2Fp5nap3w_processed.png&w=3840&q=75)
Transcribed Image Text:On July 1, 2023, Pharoah Ltd., which follows ASPE, issued 1,000 convertible, five-year, $1,000 bonds. Each bond is
convertible into 20 common shares at the bondholder's option. On the date of issuance, the bond's conversion rights
were valued at $51,000.
On July 1, 2026, the bonds had a carrying value on Pharoah's books of $969,000, and the fair market value of the bonds
without the convertible option was $973,000.
(a)
Assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2026.
Prepare the journal entry to record the conversion. (Credit account titles are automatically indented
when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for
the account titles and enter 0 for the amounts. List all debit entries before credit entries.)
Account Titles and Explanation
Bonds Payable
Common Shares
Contributed Surplus - Conversion Rights
Debit
Credit
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