Cullumber Corporation issued $6480000 of 9 %, ten-year convertible bonds on July 1, 2024 at 96.1 plus accrued interest. The bonds were dated April 1, 2024 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2025, $1296000 of these bonds were converted into 400 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion. If Interest Payable was credited when the bonds were issued, what amount should be debited to Interest Expense on October 1, 2024? Select answer from the options below a. $139320 b. $ 145800 c. $152280 d. $291600

Cullumber Corporation issued $6480000 of 9 %, ten-year convertible bonds on July 1, 2024 at 96.1 plus accrued interest. The bonds were dated April 1, 2024 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2025, $1296000 of these bonds were converted into 400 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion. If Interest Payable was credited when the bonds were issued, what amount should be debited to Interest Expense on October 1, 2024? Select answer from the options below a. $139320 b. $ 145800 c. $152280 d. $291600

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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On January 1, 2024, Madison Products issued $45 million of 8%, 10-year convertible bonds at a net price of $45.5 million. ■ Madison recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). . The bonds pay interest on June 30 and December 31. • Each $1,000 bond is convertible into 30 shares of Madison's no par common stock. • Madison records interest by the straight-line method. ⚫ On June 1, 2026, Madison notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2026. ■ By June 30, all bondholders had chosen to convert their bonds into shares as of the interest payment date. ⚫ On June 30, Madison paid the semiannual interest and issued the requisite number of shares for the bonds being converted. Required: Assume that Madison Products prepares its financial statements according to International Financial Reporting Standards using the net method. 1. & 2. Prepare the journal entries for the issuance of the bonds by…
A company issued $190,000 of 5%, ten-year convertible bonds on January 1, 2020 at 95. The bonds pay interest on June 30 and December 31. Bond discount/premium is amortized semiannually on a straight-line basis. On June 30, 2025, these bonds were converted into common stock. What should be the unamortized bond discount/premium on June 30, 2025 relating to the bonds converted? $__________
Mango Co. issued bonds payable on January 1, 2022. Each $1,000 bond is convertible to 10 shares of common stock after January 1, 2024. The bonds have a 5-year term, a stated rate of 8%, and pay interest annually on January 1. The bonds were issued at a premium of $25,274 which provides an effective interest rate of 6%. (Hint: Prepare an amortization table for the five-year term of the bonds. Note that 2023 is the second year in the term of the bonds.) Prepare the adjusting entry at Dec. 31 , 2023.
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On September 30, 2023, Sunland Inc. issued $3,280,000 of 10-year, 8% convertible bonds for $3,772,000. The bonds pay interest on March 31 and September 30 and mature on September 30, 2033. Each $1,000 bond can be converted into 80 no par value common shares. In addition, each bond included 20 detachable warrants. Each warrant can be used to purchase one common share at an exercise price of $15. Immediately after the bond issuance, the warrants traded at $3 each. Without the warrants and the conversion rights, the bonds would have been expected to sell for $3,444,000. On March 23, 2026, half of the warrants were exercised. The common shares of Sunland were trading at $20 each on this day. Immediately after the payment of interest on the bonds, on September 30, 2028, all bonds outstanding were converted into common shares. Assume the entity follows IFRS. (e) Your answer is partially correct. Prepare the journal entry to account for the exercise of the warrants on March 23, 2026. (Credit…
On August 1, 2024, Perez Communications issued $36 million of 12% nonconvertible bonds at 105. The bonds are due on July 31, 2044. Each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase, for $50, one share of Perez Communications’ no par common stock. Interstate Containers purchased 20% of the bond issue. On August 1, 2024, the market value of the common stock was $48 per share and the market value of each warrant was $8. In February 2035, when Perez common stock had a market price of $62 per share and the unamortized discount balance was $2 million, Interstate Containers exercised the warrants it held. Questions: Prepare the journal entries on August 1, 2024, to record (a) the issuance of the bonds by Perez and (b) the investment by Interstate. Prepare the journal entries for both Perez and Interstate in February 2035, to record the exercise of the warrants.
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