Instructions On January 1, 2019, Conroe Corporation sold $500,000 of 13% bonds at 107. Each $1,000 bond carried 20 warrants, and each warrant allowed the holder to acquire one share of $10 par value common stock for $20 per share. Subsequent to the issuance of the securities, the bonds were quoted at 102 ex rights, and the warrants were quoted at $4 each. Required: 1. Determine the value to be assigned to the bonds and the warrants and prepare the journal entry to record the issuance of the convertible bonds. 2. Assume that 4,000 warrants are subsequently exercised on July 1, 2021. Prepare the journal entry for the issuance of the common stock.

Instructions On January 1, 2019, Conroe Corporation sold $500,000 of 13% bonds at 107. Each $1,000 bond carried 20 warrants, and each warrant allowed the holder to acquire one share of $10 par value common stock for $20 per share. Subsequent to the issuance of the securities, the bonds were quoted at 102 ex rights, and the warrants were quoted at $4 each. Required: 1. Determine the value to be assigned to the bonds and the warrants and prepare the journal entry to record the issuance of the convertible bonds. 2. Assume that 4,000 warrants are subsequently exercised on July 1, 2021. Prepare the journal entry for the issuance of the common stock.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Falcon Company purchased 10% bonds with a face value of $200,000 at par plus accrued interest on April 1, Year 1. Interest on these bonds is payable June 30 and December 31. Falcon intends to hold the bonds until maturity in Year 3. The entry to record the acquisition of the bonds includes a debit to Investment in Trading Securities for $205,000. debit to Investment in Held-to-Maturity Debt Securities for $205,000. debit to Interest Income for $5,000. debit to Interest Receivable for $5,000.
The Gorman Group issued $930,000 of 11% bonds on June 30, 2021, for $1,009,794. The bonds were dated on June 30 and mature on June 30, 2041 (20 years). The market yield for bonds of similar risk and maturity is 10%. Interest is paid semiannually on December 31 and June 30. Required: 1.to3. Prepare the journal entries to record their issuance by The Gorman Group on Jun 30, 2021, interest on December 31, 2021, and interest on June 30, 2022 (at the effective rate). Record the issuance of the bond on June 30, 2021. Record the interest on December 31, 2021 (at the effective rate). Record the interest on June 30, 2022 (at the effective rate).
On January 1, 2026, Baker Company purchased, as an investment, 5% bonds, having a maturity value of $150,000, for $138,400. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2026, and mature January 1, 2036, with interest receivable June 30 and December 31 of each year. The securities are classified as available-for-sale. January 1, 2026 June 30, 2026 December 31, 2026 June 30, 2027 December 31, 2027 June 30, 2028 December 31, 2028 Schedule of Interest Revenue and Bond Amortization Amortization Cash Received (2.5%) Interest Revenue (3.5%) 3,750 3,750 3,750 3,750 3,750 3,750 4,844 4,882 4,922 4,963 5,005 5,049 The fair value of the bonds at December 31 of each year-end is as follows. 2026 145,000 2027 148,000 2028 152,000 1,094 1,132 1,172 1,213 1,255 1,299 Carrying Value 138,400 139,494 140,626 141,798 143,011 144,266 145,565 a) Prepare the journal entry at the date of the investment purchase. b) Prepare the journal entries to record the interest received on…
On January 1, 2025, Crane Company purchased 6% bonds, having a maturity value of $530,000 for $457,971. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2025, and mature January 1, 2035, with interest receivable June 30 and December 31 of each year. Crane Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale. The fair value of the bonds at December 31 of each year-end is as follows. 2025 2026 2027 (a) (b) (c) No. (a) $459,297 454,297 2029 (b) 449,297 (Round answers to O decimal places, e.g. 2,525. 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 O for the amounts. List all debit entries before credit entries.) Date 2028 Prepare the journal entry at the date of the bond purchase. Prepare the journal entries to record the interest received and recognition…
5. On December 31, 2018, the balance sheet of Alphabet Corporation reported bonds outstanding with a face value of $6,000,000 and a related unamortized premium of $180,000. Interest is payable semiannually on January 1 and July 1. Prepare an entry in journal form without explanation on January 1, 2018, to record the conversion of bonds with a face value of $2,400,000 into common stock. Each $1,000 bond is convertible into 30 shares of $20 par value common stock. (6]
Company A, Inc. issues $500,000, 10-year, 8% bonds at 98. Prepare the journal entry to record the sale of these bonds on March 1, 2022. Company B issues $500,000, 20-year, 9% bonds at 101. Prepare the journal entry to record the sale of these bonds on June 1, 2022. less
On December 1, 2021, Bramble Corp.issued 680 of its 8%, $1,000 bonds at 104. Attached to each bond was one detachable stock warrant entitling the holder to purchase 1 share of Bramble's common stock. On December 1, 2021, the market value of the bonds, without the stock warrants, was 97, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be $700,400 O $680,000 $672,533 $665,380
Marigold Corporation issued $660,000 of 6% bonds on May 1,2025 . The bonds were dated January 1,2025 , and mature January 1 , 2028 , with interest payable July 1 and January 1 . The bonds were issued at face value plus accrued interest. Prepare Marigold's journal entries for (a) the May 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
Grocery Corporation received $322, 294 for 9.00 percent bonds issued on January 1, 2021, at a market interest rate of 6.00 percent. The bonds had a total face value of $264,000, stated that interest would be paid each December 31, and stated that they mature in 10 years. Assume Grocery Corporation uses the straight-line method to amortize the bond premium. Required: 1. & 2. Prepare the required journal entries to record the bond issuance and the first interest payment on December 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest whole dollar.)
Carla Vista Corporation issued 2,800, 6%, 5-year, $1,000 bonds dated January 1, 2022, at 100. Interest is paid each January 1.(a)Prepare the journal entry to record the sale of these bonds on January 1, 2022. (b)Prepare the adjusting journal entry on December 31, 2022, to record interest expense (c)
On January 1, 2019, Grant Corporation issued $4,000,000, 10-year, 8% bonds at 102. Interest is payable semiannually on January 1 and July 1. The journal entry to record this transaction on January 1, 2019 includes a O credit to Premium on Bonds Payable 80,000 O debit to Cash for 4,000,000 O debit to Premium on Bonds Payable 80,000 O credit to Bonds Payable for 4,080,000
On August 1, 2025, Sandhill Company acquired $460000 face value 9% bonds of Wildhorse Corporation at 103 plus accrued interest. The bonds were dated May 1, 2025, and mature on April 30, 2030, with interest payable each October 31 and April 30. The bonds will be held to maturity. What entry should Sandhill make to record the purchase of the bonds on August 1, 2025? Debt Investments Interest Revenue Cash Debt Investments Premium on Bonds Cash Debt Investments Cash Debt Investments Interest Revenue Cash 473800 10350 460000 24150 484150 484150 484150 484150 484150 10350 473800