View PoliciesCurrent Attempt in ProgressOn January 1, 2020, when the fair value of its common shares was $85 per share, Cullumber Corp. issued $11 million of 9%convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into 4common shares. The debentures were issued for $11.7 million. The bond payment's present value at the time of issuance was $9.2million and the corporation believes the difference between the present value and the amount paid is attributable to the conversionfeature. On January 1, 2021, the corporation's common shares were split 2 for 1, and the conversion rate for the bonds was adjustedaccordingly. On January 1, 2022, when the fair value of the corporation's common shares was $140 per share, holders of 35% of theconvertible debentures exercised their conversion option. Cullumber Corp. applies ASPE, and uses the straight-line method foramortizing any bond discounts or premiums.Prepare the entry to record the original issuance of the convertible debentures. (Credit account titles are automatically indentedwhen the amount is entered. Do not indent manually.)Account Titles and ExplanationDebitCreditUsing the book value method, prepare the entry to record the exercise of the conversion option. (Credit account titles areautomatically indented when the amount is entered. Do not indent manually.)Account Titles and ExplanationDebitCreditHow many shares were issued as a result of the conversion?sharesNumber of shares issuedAssume, instead, that Cullumber Corp. decides to retire the bonds early, on January 1, 2022, by paying cash of $4,234,500 to thebondholders. On that date, the fair value of a similar bond without the conversion feature is $870 per bond. Prepare the journalentry using the book value method. (Credit account titles are automatically indented when the amount is entered. Do not indentmanually.)Account Titles and ExplanationDebitCredit

1. Journal entry for original issuance of convertible debentures Debit credit Cash Dr…

On January 1, 2020, when the fair value of its common shares was $85 per share, Cullumber Corp. issued $11 million of 9% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into 4 common shares. The debentures were issued for $11.7 million. The bond payment's present value at the time of issuance was $9.2 million and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2021, the corporation's common shares were split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2022, when the fair value of the corporation's common shares was $140 per share, holders of 35% of the convertible debentures exercised their conversion option. Cullumber Corp. applies ASPE, and uses the straight-line method for amortizing any bond discounts or premiums.

On January 1, 2020, when the fair value of its common shares was $85 per share, Cullumber Corp. issued $11 million of 9% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into 4 common shares. The debentures were issued for $11.7 million. The bond payment's present value at the time of issuance was $9.2 million and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2021, the corporation's common shares were split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2022, when the fair value of the corporation's common shares was $140 per share, holders of 35% of the convertible debentures exercised their conversion option. Cullumber Corp. applies ASPE, and uses the straight-line method for amortizing any bond discounts or premiums.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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