On January 1, 2023, DMW Corporation issued a series of 100 convertible bonds, maturing in 5 years. The face amount of each bond was $500. DMW received $51,300 for the bond issue. The bonds paid interest every December 31 at 6%; the market interest rate for bonds with a comparable level of risk was 6.50%. The bonds were convertible to common shares at a rate of 12 common shares per bond. DMW amortized bond premiums and discounts using the effective interest method, and the company's year-end was December 31. DMW follows ASPE. On January 1, 2024, 20 of the bonds were converted into common shares. On June 30, 2024, another 20 bonds were converted into common shares. The bondholders chose to forfeit the accrued interest on these bonds. On January 1, 2025, when the fair value of the bonds was $30,690 due to a decrease in market interest rates, a conversion inducement of $28/bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 60 bonds were converted into common shares at this time. a. b. C. d. e. f. Prepare the journal entry at January 1, 2023. Prepare the journal entry at December 31, 2023. Prepare the journal entry at January 1, 2024. Prepare the journal entry at June 30, 2024. Prepare the journal entry at December 31, 2024. Prepare the journal entry at January 1, 2025. (Do not round intermediate calculations. Round answers to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem. List all debit entries before credit entries.) Account Titles and Explanation Cash Bonds Payable Contributed Surplus - Conversion Rights Interest Expense Bonds Payable Cash Bonds Payable Contributed Surplus - Conversion Rights Common Shares Debit Credit
On January 1, 2023, DMW Corporation issued a series of 100 convertible bonds, maturing in 5 years. The face amount of each bond was $500. DMW received $51,300 for the bond issue. The bonds paid interest every December 31 at 6%; the market interest rate for bonds with a comparable level of risk was 6.50%. The bonds were convertible to common shares at a rate of 12 common shares per bond. DMW amortized bond premiums and discounts using the effective interest method, and the company's year-end was December 31. DMW follows ASPE. On January 1, 2024, 20 of the bonds were converted into common shares. On June 30, 2024, another 20 bonds were converted into common shares. The bondholders chose to forfeit the accrued interest on these bonds. On January 1, 2025, when the fair value of the bonds was $30,690 due to a decrease in market interest rates, a conversion inducement of $28/bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 60 bonds were converted into common shares at this time. a. b. C. d. e. f. Prepare the journal entry at January 1, 2023. Prepare the journal entry at December 31, 2023. Prepare the journal entry at January 1, 2024. Prepare the journal entry at June 30, 2024. Prepare the journal entry at December 31, 2024. Prepare the journal entry at January 1, 2025. (Do not round intermediate calculations. Round answers to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem. List all debit entries before credit entries.) Account Titles and Explanation Cash Bonds Payable Contributed Surplus - Conversion Rights Interest Expense Bonds Payable Cash Bonds Payable Contributed Surplus - Conversion Rights Common Shares Debit Credit
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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Transcribed Image Text:On January 1, 2023, DMW Corporation issued a series of 100 convertible bonds, maturing in 5 years. The face amount
of each bond was $500. DMW received $51,300 for the bond issue. The bonds paid interest every December 31 at 6%;
the market interest rate for bonds with a comparable level of risk was 6.50%. The bonds were convertible common
shares at a rate of 12 common shares per bond. DMW amortized bond premiums and discounts using the effective
interest method, and the company's year-end was December 31. DMW follows ASPE.
On January 1, 2024, 20 of the bonds were converted into common shares. On June 30, 2024, another 20 bonds were
converted into common shares. The bondholders chose to forfeit the accrued interest on these bonds.
On January 1, 2025, when the fair value of the bonds was $30,690 due to a decrease in market interest rates, a
conversion inducement of $28/bond was offered to the remaining bondholders to convert their bonds to common
shares. All of the remaining 60 bonds were converted into common shares at this time.
a.
b.
C.
d.
e.
f.
Prepare the journal entry at January 1, 2023.
Prepare the journal entry at December 31, 2023.
Prepare the journal entry at January 1, 2024.
Prepare the journal entry at June 30, 2024.
Prepare the journal entry at December 31, 2024.
Prepare the journal entry at January 1, 2025.
(Do not round intermediate calculations. Round answers to 0 decimal places e.g. 58,971. Credit
account titles are automatically indented when the amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal
entries in the order presented in the problem. List all debit entries before credit entries.)
Account Titles and Explanation
Cash
Bonds Payable
Contributed Surplus - Conversion Rights
Interest Expense
Bonds Payable
Cash
Bonds Payable
Contributed Surplus - Conversion Rights
Common Shares
Debit
Credit
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