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

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 9P

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On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.
Naval Inc. issued $200,000 face value bonds at a discount and received $190,000. At the end of 2018, the balance in the Discount on Bonds Payable account is $5,000. This years balance sheet will show a net liability of ________. A. $200,000 B. $180,000 C. $195,000 D. $205,000
Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
Mills Corp. (MC) prepares its statements in accordance with IFRS. On January 1, 2021, MC issued 1,000 seven-year, 5% convertible bonds with a face value of $1,000. Interest is paid annually on the bonds on December 31. Each $1,000 bond is convertible into 35 common shares, which are currently trading at $34 per share. Similar bonds without conversion features carry an interest rate of 7%. The bonds were issued at 94. Required: Calculate the amount to be allocated to the bond and the options, and record the journal entry at the date of issuance. Assume that after six years, when the carrying amount of the bonds is $981,308, the holders of the convertible bond decide to convert their bonds before the bond maturity date. Prepare the journal entry to record the conversion. How many shares were issued at the conversion?
Florence Inc. issued 8,000, 5-year convertible bonds of $2,000 each for $4,000,000 at the beginning of 2021. The bonds have a stated rate of interest of 9% and interest is payable annually. Each bond can be convertible into 100 shares with a par value of $10. The market rate of similar nonconvertible debt is 10%. Determine the fair value of the equity component using the “with-and-without” method is a. $3,848,288 b. $2,483,600 c. $1,365,688 d. $151,712
Sandhill Co. issued $4,100,000 of 12%, 5-year convertible bonds on December 1, 2020 for $4,122,360 plus accrued interest. The bonds were dated April 1, 2020 with interest payable April 1 and October 1. Bond premium is amortized each interest period on a straight-line basis. Sandhill Co. has a fiscal year end of September 30. On October 1, 2021, $2,050,000 of these bonds were converted into 28,000 shares of $15 par common stock. Accrued interest was paid in cash at the time of conversion. Prepare the entry to record the interest expense at April 1, 2021. Assume that interest payable was credited when the bonds were issued.
Sandhill Co. issued $4,100,000 of 12%, 5-year convertible bonds on December 1, 2020 for $4,122,360 plus accrued interest. The bonds were dated April 1, 2020 with interest payable April 1 and October 1. Bond premium is amortized each interest period on a straight-line basis. Sandhill Co. has a fiscal year end of September 30. On October 1, 2021, $2,050,000 of these bonds were converted into 28,000 shares of $15 par common stock. Accrued interest was paid in cash at the time of conversion.Prepare the entry to record the conversion on October 1, 2021. Assume that the entry to record amortization of the bond premium and interest payment has been made.
On January 1, 2021, Instaform, Inc., issued 14% bonds with a face amount of $60 million, dated January 1. The bonds mature in 2040 (20 years). The market yield for bonds of similar risk and maturity is 16%. Interest is paid semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Determine the price of the bonds at January 1, 2021. 1-b. Prepare the journal entry to record their issuance by Instaform. 2-a. Assume the market rate was 12%. Determine the price of the bonds at January 1, 2021. 2-b. Assume the market rate was 12%. Prepare the journal entry to record their issuance by Instaform. 3. Assume Broadcourt Electronics purchased the entire issue in a private placement of the bonds. Using the data in requirement 2, prepare the journal entry to record the purchase by Broadcourt. Complete this question by entering your answers in the tabs below. Reg 1A Req 1B Req 2A Req 2B Req 3 Determine the…
On January 1, 2021, Baddour, Inc., issued 10% bonds with a face amount of $160 million. The bonds were priced at $140 million to yield 12%. Interest is paid semiannually on June 30 and December 31. Baddour’s fiscal year ends September 30.Required:1. What amount(s) related to the bonds would Baddour report in its balance sheet at September 30, 2021?2. What amount(s) related to the bonds would Baddour report in its income statement for the year ended September 30, 2021?3. What amount(s) related to the bonds would Baddour report in its statement of cash flows for the year ended September 30, 2021? In which section(s) should the amount(s) appear?
Stinson Corporation issued $600,000 of 7%, 10-year bonds payable on March 31, 2022. The market interest rate at the date of issuance was 9%, and the bonds pay interest semiannualy. St Corporation's year-end is March 31. Read the requirements. 1. Using the PV function in Excel, The issue price of the bonds is Requirements 1. Using the PV function in Excel, calculate the issue price of the bonds 2. Prepare an effective-interest amortization table for the bonds through the first three interest payments. Round amounts to the nearest dollar 3. Record Stinson Corporation's issuance of the bonds on March 31, 2022, and payment of the first semiannual interest amount and amortization of the bond discount on September 30, 2022 Explanations are not required Print Done X Clear all Check answer