(Learning Objectives 2, 3, 6: Issue convertible bonds at a discount, amortize usingthe effective-interest method, and convert bonds; report bonds payable on the balancesheet) On December 31, 2018, Mainland Corporation issues 6%, 10-year convertible bondspayable with a face value of $4,000,000. The semiannual interest dates are June 30 andDecember 31. The market interest rate is 8%. Mainland amortizes bond discounts using theeffective-interest method.Requirements1. Use the PV function in Excel to calculate the issue price of the bonds.2. Prepare an effective-interest method amortization table for the term of the bonds usingExcel.3. Journalize the following transactions:a. Issuance of the bonds on December 31, 2018. Credit Convertible Bonds Payable.b. Payment of interest and amortization of the bond discount on June 30, 2019.c. Payment of interest and amortization of the bond discount on December 31, 2019.d. Conversion by the bondholders on July 1, 2020, of bonds with a total face value of$1,600,000 into 80,000 shares of Mainland’s $1-par common stock.4. Show how Mainland would report the remaining bonds payable on its balance sheet atDecember 31, 2020.
(Learning Objectives 2, 3, 6: Issue convertible bonds at a discount, amortize using
the effective-interest method, and convert bonds; report bonds payable on the balance
sheet) On December 31, 2018, Mainland Corporation issues 6%, 10-year convertible bonds
payable with a face value of $4,000,000. The semiannual interest dates are June 30 and
December 31. The market interest rate is 8%. Mainland amortizes bond discounts using the
effective-interest method.
Requirements
1. Use the PV function in Excel to calculate the issue price of the bonds.
2. Prepare an effective-interest method amortization table for the term of the bonds using
Excel.
3. Journalize the following transactions:
a. Issuance of the bonds on December 31, 2018. Credit Convertible Bonds Payable.
b. Payment of interest and amortization of the bond discount on June 30, 2019.
c. Payment of interest and amortization of the bond discount on December 31, 2019.
d. Conversion by the bondholders on July 1, 2020, of bonds with a total face value of
$1,600,000 into 80,000 shares of Mainland’s $1-par common stock.
4. Show how Mainland would report the remaining bonds payable on its balance sheet at
December 31, 2020.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 7 images
