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Dec. c) 31, 2026 Dec. 31, 2026 Interest Expense Discount on Bonds Payable (To record amortization of discount on bonds) Interest Expense Dec. 31, Interest Payable (To record accrual of interest payable on bonds) Income Summary 2026 Interest Expense (To close expense account) 000000 No. Date Account Titles and Explanation Debit (a) Oct. 1, 2026 Bonds Payable Discount on Bonds Payable Common Stock Oct. 1, 2026 Paid-in Capital in Excess of Par-Common Stock (To record conversion of bonds to common stock) Interest Payable cash Oct. (b) 31, 2026 (To record payment of interest due on converted bonds) Interest Expense Discount on Bonds Payable (To record amortization of discount on bonds) Oct. 31, Interest Expense 2026 Interest Payable (To record accrual of interest payable on bonds) 504000 1496 18480 Credit 9180 7560 487260 1496 18480

Dec. c) 31, 2026 Dec. 31, 2026 Interest Expense Discount on Bonds Payable (To record amortization of discount on bonds) Interest Expense Dec. 31, Interest Payable (To record accrual of interest payable on bonds) Income Summary 2026 Interest Expense (To close expense account) 000000 No. Date Account Titles and Explanation Debit (a) Oct. 1, 2026 Bonds Payable Discount on Bonds Payable Common Stock Oct. 1, 2026 Paid-in Capital in Excess of Par-Common Stock (To record conversion of bonds to common stock) Interest Payable cash Oct. (b) 31, 2026 (To record payment of interest due on converted bonds) Interest Expense Discount on Bonds Payable (To record amortization of discount on bonds) Oct. 31, Interest Expense 2026 Interest Payable (To record accrual of interest payable on bonds) 504000 1496 18480 Credit 9180 7560 487260 1496 18480

College Accounting, Chapters 1-27
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter22: Corporations: Bonds
Section: Chapter Questions
Problem 5MC: Bond sinking fund earnings are (a) subtracted from the bond sinking fund. (b) added to the bond...
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Buffalo Inc. issued $4,200,000 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 $102,000, which is being amortized monthly on a straight-line basis.

The bonds are convertible after one year into 15 shares of Buffalo Inc's $1 par value common stock for each $1,000 of bonds.

On October 1, 2026, $504,000 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. 

Dec. c) 31, 2026 Dec. 31, 2026 Interest Expense Discount on Bonds Payable (To record amortization of discount on bonds) Interest Expense Dec. 31, Interest Payable (To record accrual of interest payable on bonds) Income Summary 2026 Interest Expense (To close expense account) 000000
Transcribed Image Text:Dec. c) 31, 2026 Dec. 31, 2026 Interest Expense Discount on Bonds Payable (To record amortization of discount on bonds) Interest Expense Dec. 31, Interest Payable (To record accrual of interest payable on bonds) Income Summary 2026 Interest Expense (To close expense account) 000000
No. Date Account Titles and Explanation Debit (a) Oct. 1, 2026 Bonds Payable Discount on Bonds Payable Common Stock Oct. 1, 2026 Paid-in Capital in Excess of Par-Common Stock (To record conversion of bonds to common stock) Interest Payable cash Oct. (b) 31, 2026 (To record payment of interest due on converted bonds) Interest Expense Discount on Bonds Payable (To record amortization of discount on bonds) Oct. 31, Interest Expense 2026 Interest Payable (To record accrual of interest payable on bonds) 504000 1496 18480 Credit 9180 7560 487260 1496 18480
Transcribed Image Text:No. Date Account Titles and Explanation Debit (a) Oct. 1, 2026 Bonds Payable Discount on Bonds Payable Common Stock Oct. 1, 2026 Paid-in Capital in Excess of Par-Common Stock (To record conversion of bonds to common stock) Interest Payable cash Oct. (b) 31, 2026 (To record payment of interest due on converted bonds) Interest Expense Discount on Bonds Payable (To record amortization of discount on bonds) Oct. 31, Interest Expense 2026 Interest Payable (To record accrual of interest payable on bonds) 504000 1496 18480 Credit 9180 7560 487260 1496 18480
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