On January 1, 2021, Fowl Products issued $89 million of 6%, 10-year convertible bonds at a net price of $91.5 million. Fowl recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Fowl's no par common. stock. Fowl records interest by the straight-line method. On June 1, 2023, Fowl notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2023. By June 30 all bondholders had chosen to convert their bonds into shares as of the interest payment date. On June 30, Fowl paid the semiannual interest and issued the requisite number of shares for the bonds being converted. Required: 1. Prepare the journal entry for the issuance of the bonds by Fowl. 2. Prepare the journal entry for the June 30, 2021, interest payment. 3. Prepare the journal entries for the June 30, 2023, interest payment by Fowl and the conversion of the bonds (book value method). Complete this

On January 1, 2021, Fowl Products issued $89 million of 6%, 10-year convertible bonds at a net price of $91.5 million. Fowl recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Fowl's no par common. stock. Fowl records interest by the straight-line method. On June 1, 2023, Fowl notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2023. By June 30 all bondholders had chosen to convert their bonds into shares as of the interest payment date. On June 30, Fowl paid the semiannual interest and issued the requisite number of shares for the bonds being converted. Required: 1. Prepare the journal entry for the issuance of the bonds by Fowl. 2. Prepare the journal entry for the June 30, 2021, interest payment. 3. Prepare the journal entries for the June 30, 2023, interest payment by Fowl and the conversion of the bonds (book value method). Complete this

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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On January 1, 2021, Gless Textiles issued $13.9 million of 11%, 10-year convertible bonds at 102. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 50 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 12% of the issue as an investment. Required:Assume Gless Textiles prepares its financial statements according to International Financial Reporting Standards. Prepare the journal entry for the issuance of the bonds by Gless using the net method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)
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Gerard Corporation has the following convertible bonds. A $100,000 convertible bond was issued at par on January 1, 2021, at 4%. The bond is convertible into 30,000 shares of common stock. Additionally, there was a convertible bond that was purchased on November 1, 2021, at par, for $200,000 with an interest rate of 6%, this bond is convertible into 20,000 shares of common stock. Both bonds pay interest annually. Gerard Corporation has total revenue of 800,000 and expenses of 400,000, which does not include interest expense or taxes. The tax rate is 40%. Additionally, the organization currently has 300,000 shares of common stock outstanding for the entire year. No dividends were paid in 2021. Calculate Earnings per share. Calculate Dilutive Earnings per share using the if converted method.
On January 1, 2024, Madison Products issued $45 million of 8%, 10-year convertible bonds at a net price of $45.5 million. ■ Madison recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). . The bonds pay interest on June 30 and December 31. • Each $1,000 bond is convertible into 30 shares of Madison's no par common stock. • Madison records interest by the straight-line method. ⚫ On June 1, 2026, Madison notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2026. ■ By June 30, all bondholders had chosen to convert their bonds into shares as of the interest payment date. ⚫ On June 30, Madison paid the semiannual interest and issued the requisite number of shares for the bonds being converted. Required: Assume that Madison Products prepares its financial statements according to International Financial Reporting Standards using the net method. 1. & 2. Prepare the journal entries for the issuance of the bonds by…
Nichols Corporation has the following convertible bonds. A $100,000 convertible bond was issued at par on January 1, 2021, at 4%. The bond is convertible into 30,000 shares of common stock. Additionally, there was a convertible bond that was purchased on November 1, 2021, at par, for $200,000 with an interest rate of 6%, this bond is convertible into 20,000 shares of common stock. Both bonds pay interest annually. Nichols Corporation has total revenue of 800,000 and expenses of 400,000, which does not include interest expense or taxes. The tax rate is 40%. Additionally, the organization currently has 300,000 shares of common stock outstanding for the entire year. No dividends were paid in 2021. A. Calculate Earnings per share. B. Calculate Dilutive Earnings per share using the if converted method.
On January 1, 2017, Slug Corporation issued $6.4 million of 6%, 10-year convertible bonds at 103. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of $1 par common stock. Fuzz Company purchased 30% of the issue as an investment. On July 1, 2021, Fuzz converted all of its bonds into common stock of Slug. The market price per share for Slug was $36 at the time of the conversion. Both companies use the straight-line method for amortization. Required: 1. Prepare journal entries for the issuance of the bonds on the issuer and the investor books. 2. Prepare the journal entries for the conversion on the books of the issuer and the investor. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare journal entries for the issuance of the bonds on the issuer and the investor books. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your…
On January 1, 2024, Gless Textiles issued $13 million of 10%, 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 15% of the issue as an investment. Required: Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century. Prepare the journal entries for the June 30, 2028, interest payment by both Gless and Century assuming both use the straight-line method. On July 1, 2029, 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).
On March 1, 2021, E Corp. issued $1,000,000 of 10% nonconvertible bonds at 104, due on February 28, 2031. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitled the holder to purchase, for $60, one share of Evan's $30 par common stock. On March 1, 2021, the market price of each warrant was $4. By what amount should the bond issue proceeds increase shareholders' equity?
On September 30, 2023, Sunland Inc. issued $3,280,000 of 10-year, 8% convertible bonds for $3,772,000. The bonds pay interest on March 31 and September 30 and mature on September 30, 2033. Each $1,000 bond can be converted into 80 no par value common shares. In addition, each bond included 20 detachable warrants. Each warrant can be used to purchase one common share at an exercise price of $15. Immediately after the bond issuance, the warrants traded at $3 each. Without the warrants and the conversion rights, the bonds would have been expected to sell for $3,444,000. On March 23, 2026, half of the warrants were exercised. The common shares of Sunland were trading at $20 each on this day. Immediately after the payment of interest on the bonds, on September 30, 2028, all bonds outstanding were converted into common shares. Assume the entity follows IFRS. (e) Your answer is partially correct. Prepare the journal entry to account for the exercise of the warrants on March 23, 2026. (Credit…
On August 1, 2024, Perez Communications issued $36 million of 12% nonconvertible bonds at 105. The bonds are due on July 31, 2044. Each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase, for $50, one share of Perez Communications’ no par common stock. Interstate Containers purchased 20% of the bond issue. On August 1, 2024, the market value of the common stock was $48 per share and the market value of each warrant was $8. In February 2035, when Perez common stock had a market price of $62 per share and the unamortized discount balance was $2 million, Interstate Containers exercised the warrants it held. Questions: Prepare the journal entries on August 1, 2024, to record (a) the issuance of the bonds by Perez and (b) the investment by Interstate. Prepare the journal entries for both Perez and Interstate in February 2035, to record the exercise of the warrants.
Telta Inc. issued $15,000,000 of 12%, 40-year convertible bonds on November 1, 2025, at 97 plus accrued interest. The bonds were dated July 1, 2025, with interest payable January 1 and July 1. Bond discount (premium) is amortized semiannually on a straight-line basis. On July 1, 2026, one-half of these bonds were converted into 60,000 shares of $1 par value common stock. Accrued interest was paid in cash at the time of conversion. (a) (b) Prepare the entry to record the interest expense at December 31, 2025. Assume that accrued interest payable was credited when the bonds were issued. Credit Interest Payable for the full amount due; debit Interest Payable for the amount recognized at insurance. (Round to nearest dollar.) Prepare the entry to record the conversion on July 1, 2026. (Book value method is used.) Assume that the entry to record amortization of the bond discount and interest payment has been made.
On December 1, 2021, Bramble Corp.issued 680 of its 8%, $1,000 bonds at 104. Attached to each bond was one detachable stock warrant entitling the holder to purchase 1 share of Bramble's common stock. On December 1, 2021, the market value of the bonds, without the stock warrants, was 97, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be $700,400 O $680,000 $672,533 $665,380