On January 1, 2016, Ayayai Company issued 10-year, $92,000 face value, 6% bonds at par (interest payable annually on January 1). Each $1,000 bond is convertible into 32 shares of Ayayai $2 par value common stock. The company has had 10,000 shares of common stock (and no preferred stock) outstanding throughout its life. None of the bonds have been converted as of the end of 2017. Ayayai also has adopted a stock-option plan that granted options to key executives to purchase 6,000 shares of the company's common stock. The options were granted on January 2, 2016, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company (the service period is 2 years). The options expired 6 years from the date of grant. The option price was set at $5, and the fair value option-pricing model determines the total compensation expense to be $26,000. All of the options were exercised during the year 2018: 3,000 on January 3 when the market price was $7, and 1,000 on May 1 when the market price was $8 a share. (Ignore all tax effects.) (a) Prepare the journal entry Ayayai would have made on January 1, 2016, to record the issuance of the bonds. (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 O for the amounts.) Account Titles and Explanation Debit Credit
On January 1, 2016, Ayayai Company issued 10-year, $92,000 face value, 6% bonds at par (interest payable annually on January 1). Each $1,000 bond is convertible into 32 shares of Ayayai $2 par value common stock. The company has had 10,000 shares of common stock (and no preferred stock) outstanding throughout its life. None of the bonds have been converted as of the end of 2017. Ayayai also has adopted a stock-option plan that granted options to key executives to purchase 6,000 shares of the company's common stock. The options were granted on January 2, 2016, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company (the service period is 2 years). The options expired 6 years from the date of grant. The option price was set at $5, and the fair value option-pricing model determines the total compensation expense to be $26,000. All of the options were exercised during the year 2018: 3,000 on January 3 when the market price was $7, and 1,000 on May 1 when the market price was $8 a share. (Ignore all tax effects.) (a) Prepare the journal entry Ayayai would have made on January 1, 2016, to record the issuance of the bonds. (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 O for the amounts.) Account Titles and Explanation Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2016, Ayayai Company issued 10-year, $92,000 face value, 6% bonds at par (interest payable annually on January 1).
Each $1,000 bond is convertible into 32 shares of Ayayai $2 par value common stock. The company has had 10,000 shares of common
stock (and no preferred stock) outstanding throughout its life. None of the bonds have been converted as of the end of 2017. Ayayai
also has adopted a stock-option plan that granted options to key executives to purchase 6,000 shares of the company's common stock.
The options were granted on January 2, 2016, and were exercisable 2 years after the date of grant if the grantee was still an employee
of the company (the service period is 2 years). The options expired 6 years from the date of grant. The option price was set at $5, and
the fair value option-pricing model determines the total compensation expense to be $26,000. All of the options were exercised
during the year 2018: 3,000 on January 3 when the market price was $7, and 1,000 on May 1 when the market price was $8 a share.
(Ignore all tax effects.)
(a)
Prepare the journal entry Ayayai would have made on January 1, 2016, to record the issuance of the bonds. (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 O for the amounts.)
Account Titles and Explanation
Debit
Credit
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