Bradley-Link's December 31, 2024, balance sheet included the following items: Long-Term Liabilities 9.0% convertible bonds, callable at 103 beginning in 2025, due 2028 (net of unamortized discount of $3) [note 8] 9.8% registered bonds callable at 106 beginning in 2034, due 2038 (net of unamortized discount of $2) [note 8] ($ in millions $ 147 60 Shareholders' Equity Equity-stock warrants Note 8: Bonds (in part) 5 The 9.0% bonds were issued in 2011 at 94.0 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond is convertible into 50 shares of the Company's no par common stock. The 9.8% bonds were issued in 2015 at 104 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitles the holder to purchase one share of the Company's no par common stock for $35, beginning 2025. On January 3, 2025, when Bradley-Link's common stock had a market price of $42 per share, Bradley-Link called the convertible bonds to force conversion. Ninety percent were converted; the remainder were acquired at the call price. When the common stock price reached an all-time high of $47 in December of 2025, 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 2011 and 2015. 2. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2025 and the retirement of the remainder. 3. Assume Bradley-Link induced conversion by offering $160 cash for each bond converted. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2025. 4. Assume Bradley-Link induced conversion by modifying the conversion ratio to exchange 55 shares for each bond rather than the 50 shares provided in the contract. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2025. 5. Prepare the journal entry to record the exercise of the warrants in December 2025.
Bradley-Link's December 31, 2024, balance sheet included the following items: Long-Term Liabilities 9.0% convertible bonds, callable at 103 beginning in 2025, due 2028 (net of unamortized discount of $3) [note 8] 9.8% registered bonds callable at 106 beginning in 2034, due 2038 (net of unamortized discount of $2) [note 8] ($ in millions $ 147 60 Shareholders' Equity Equity-stock warrants Note 8: Bonds (in part) 5 The 9.0% bonds were issued in 2011 at 94.0 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond is convertible into 50 shares of the Company's no par common stock. The 9.8% bonds were issued in 2015 at 104 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitles the holder to purchase one share of the Company's no par common stock for $35, beginning 2025. On January 3, 2025, when Bradley-Link's common stock had a market price of $42 per share, Bradley-Link called the convertible bonds to force conversion. Ninety percent were converted; the remainder were acquired at the call price. When the common stock price reached an all-time high of $47 in December of 2025, 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 2011 and 2015. 2. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2025 and the retirement of the remainder. 3. Assume Bradley-Link induced conversion by offering $160 cash for each bond converted. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2025. 4. Assume Bradley-Link induced conversion by modifying the conversion ratio to exchange 55 shares for each bond rather than the 50 shares provided in the contract. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2025. 5. Prepare the journal entry to record the exercise of the warrants in December 2025.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Bradley-Link's December 31, 2024, balance sheet included the following items:
Long-Term Liabilities
9.0% convertible bonds, callable at 103 beginning in 2025, due
2028 (net of unamortized discount of $3) [note 8]
9.8% registered bonds callable at 106 beginning in 2034, due
2038 (net of unamortized discount of $2) [note 8]
($ in millions
$ 147
60
Shareholders' Equity
Equity-stock warrants
Note 8: Bonds (in part)
5
The 9.0% bonds were issued in 2011 at 94.0 to yield 10%. Interest is paid semiannually on
June 30 and December 31. Each $1,000 bond is convertible into 50 shares of the
Company's no par common stock.
The 9.8% bonds were issued in 2015 at 104 to yield 10%. Interest is paid semiannually on
June 30 and December 31. Each $1,000 bond was issued with 50 detachable stock
warrants, each of which entitles the holder to purchase one share of the Company's no
par common stock for $35, beginning 2025.
On January 3, 2025, when Bradley-Link's common stock had a market price of $42 per
share, Bradley-Link called the convertible bonds to force conversion. Ninety percent were
converted; the remainder were acquired at the call price. When the common stock price
reached an all-time high of $47 in December of 2025, 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 2011 and 2015.
2. Prepare the journal entry to record (book value method) the conversion of 90% of
the convertible bonds in January 2025 and the retirement of the remainder.
3. Assume Bradley-Link induced conversion by offering $160 cash for each bond
converted. Prepare the journal entry to record (book value method) the conversion
of 90% of the convertible bonds in January 2025.
4. Assume Bradley-Link induced conversion by modifying the conversion ratio to
exchange 55 shares for each bond rather than the 50 shares provided in the
contract. Prepare the journal entry to record (book value method) the conversion of
90% of the convertible bonds in January 2025.
5. Prepare the journal entry to record the exercise of the warrants in December 2025.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe3941239-002e-43e3-8e2d-45b3676a79ce%2Fc5fe486c-7a2d-4402-b3ff-d3b32dbe52a2%2Fol1pgd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Bradley-Link's December 31, 2024, balance sheet included the following items:
Long-Term Liabilities
9.0% convertible bonds, callable at 103 beginning in 2025, due
2028 (net of unamortized discount of $3) [note 8]
9.8% registered bonds callable at 106 beginning in 2034, due
2038 (net of unamortized discount of $2) [note 8]
($ in millions
$ 147
60
Shareholders' Equity
Equity-stock warrants
Note 8: Bonds (in part)
5
The 9.0% bonds were issued in 2011 at 94.0 to yield 10%. Interest is paid semiannually on
June 30 and December 31. Each $1,000 bond is convertible into 50 shares of the
Company's no par common stock.
The 9.8% bonds were issued in 2015 at 104 to yield 10%. Interest is paid semiannually on
June 30 and December 31. Each $1,000 bond was issued with 50 detachable stock
warrants, each of which entitles the holder to purchase one share of the Company's no
par common stock for $35, beginning 2025.
On January 3, 2025, when Bradley-Link's common stock had a market price of $42 per
share, Bradley-Link called the convertible bonds to force conversion. Ninety percent were
converted; the remainder were acquired at the call price. When the common stock price
reached an all-time high of $47 in December of 2025, 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 2011 and 2015.
2. Prepare the journal entry to record (book value method) the conversion of 90% of
the convertible bonds in January 2025 and the retirement of the remainder.
3. Assume Bradley-Link induced conversion by offering $160 cash for each bond
converted. Prepare the journal entry to record (book value method) the conversion
of 90% of the convertible bonds in January 2025.
4. Assume Bradley-Link induced conversion by modifying the conversion ratio to
exchange 55 shares for each bond rather than the 50 shares provided in the
contract. Prepare the journal entry to record (book value method) the conversion of
90% of the convertible bonds in January 2025.
5. Prepare the journal entry to record the exercise of the warrants in December 2025.
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