Larkspur Inc. issued $5,550,000 of convertible 5-year bonds on July 1, 2025. The bonds provide for 6% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $117,000, which is being amortized monthly on a straight-line basis. The bonds are convertible after one year into 15 shares of Larkspur Inc.'s $1 par value common stock for each $1,000 of bonds. On October 1, 2026, $666,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash. Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates. (Credit account titles are automatically indented when 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.) (a) (b) (c) October 1, 2026. (Assume the book value method is used.) October 31, 2026. December 31, 2026, including closing entries for end-of-year. No. Date Account Titles and Explanation Oct. 1, 2026 (a) Oct. 1, 2026 Bonds Payable Discount on Bonds Payable Common Stock Paid-in Capital in Excess of Par - Common St (To record conversion of bonds to common stock) Interest Payable Cash (To record payment of interest due on converted bonds) Debit 666000 3330 Cred
Larkspur Inc. issued $5,550,000 of convertible 5-year bonds on July 1, 2025. The bonds provide for 6% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $117,000, which is being amortized monthly on a straight-line basis. The bonds are convertible after one year into 15 shares of Larkspur Inc.'s $1 par value common stock for each $1,000 of bonds. On October 1, 2026, $666,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash. Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates. (Credit account titles are automatically indented when 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.) (a) (b) (c) October 1, 2026. (Assume the book value method is used.) October 31, 2026. December 31, 2026, including closing entries for end-of-year. No. Date Account Titles and Explanation Oct. 1, 2026 (a) Oct. 1, 2026 Bonds Payable Discount on Bonds Payable Common Stock Paid-in Capital in Excess of Par - Common St (To record conversion of bonds to common stock) Interest Payable Cash (To record payment of interest due on converted bonds) Debit 666000 3330 Cred
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Larkspur Inc. issued $5,550,000 of convertible 5-year bonds on July 1, 2025. The bonds provide for 6% interest payable
semiannually on January 1 and July 1. The discount in connection with the issue was $117,000, which is being
amortized monthly on a straight-line basis.
The bonds are convertible after one year into 15 shares of Larkspur Inc.'s $1 par value common stock for each $1,000 of
bonds.
On October 1, 2026, $666,000 of bonds were turned in for conversion into common stock. Interest has been accrued
monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash.
Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the
following dates. (Credit account titles are automatically indented when 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.)
(a)
(b)
(c)
October 1, 2026. (Assume the book value method is used.)
October 31, 2026.
December 31, 2026, including closing entries for end-of-year.
No. Date Account Titles and Explanation
Oct.
(a) 1,
2026
Oct.
1,
2026
Bonds Payable
Discount on Bonds Payable
Common Stock
Paid-in Capital in Excess of Par - Common St
(To record conversion of bonds to common
stock)
Interest Payable
Cash
(To record payment of interest due on converted
bonds)
Debit
666000
11
3330
Cred
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