Fayuz Ltd. issued $300,000, 12%, 10-year bonds on July 1, 2020. Interest payments dates are January 2 and July 1. The issue price was $293,400. The bonds are convertible into common shares at the rate of 15 common shares for each $1,000 bond. The market price of Fayuz Ltd. common shares has risen steadily over the last two years and on July 1, 2022, half of the bonds are converted into common shares. a) Compute the balance in the premium or discount account on date of conversion. Fayuz Ltd. uses the straight-line method of amortization. b) Prepare the entry to convert half of the bonds into common shares.
Fayuz Ltd. issued $300,000, 12%, 10-year bonds on July 1, 2020. Interest payments dates are January 2 and July 1. The issue price was $293,400. The bonds are convertible into common shares at the rate of 15 common shares for each $1,000 bond. The market price of Fayuz Ltd. common shares has risen steadily over the last two years and on July 1, 2022, half of the bonds are converted into common shares. a) Compute the balance in the premium or discount account on date of conversion. Fayuz Ltd. uses the straight-line method of amortization. b) Prepare the entry to convert half of the bonds into common shares.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Fayuz Ltd. issued $300,000, 12%, 10-year bonds on July 1, 2020. Interest payments dates are
January 2 and July 1. The issue price was $293,400. The bonds are convertible into common
shares at the rate of 15 common shares for each $1,000 bond. The market price of Fayuz Ltd.
common shares has risen steadily over the last two years and on July 1, 2022, half of the bonds
are converted into common shares.
a) Compute the balance in the premium or discount account on date of conversion. Fayuz Ltd.
uses the straight-line method of amortization.
b) Prepare the entry to convert half of the bonds into common shares.
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