On January 1, 2018, Gless Textiles issued $12 million of 9%, 10-year convertible bonds at 101. The bonds payinterest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Gless’s no par commonstock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is,99% of face amount). Century Services purchased 10% of the issue as an investment.Required:1. Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment byCentury.2. Prepare the journal entries for the June 30, 2022, interest payment by both Gless and Century assuming bothuse the straight-line method.3. On July 1, 2023, when Gless’s common stock had a market price of $33 per share, Century converted thebonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (bookvalue method).
On January 1, 2018, Gless Textiles issued $12 million of 9%, 10-year convertible bonds at 101. The bonds pay
interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Gless’s no par common
stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is,
99% of face amount). Century Services purchased 10% of the issue as an investment.
Required:
1. Prepare the
Century.
2. Prepare the journal entries for the June 30, 2022, interest payment by both Gless and Century assuming both
use the straight-line method.
3. On July 1, 2023, when Gless’s common stock had a market price of $33 per share, Century converted the
bonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (book
value method).
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