On January 1, 2023, SJW Corporation issued a series of 100 convertible bonds, maturing in 5 years. The face amount of each bond was $500. SJW received $50,800 for the bond issue. The bonds paid interest every December 31 at 4%; the market interest rate for bonds with a comparable level of risk was 4.50%. The bonds were convertible to common shares at a rate of 8 common shares per bond. SJW amortized bond premiums and discounts using the effective interest method, and the company's year-end was December 31. SJW 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 $30,380 due to a decrease in market interest rates, a conversion inducement of $25/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.
On January 1, 2023, SJW Corporation issued a series of 100 convertible bonds, maturing in 5 years. The face amount of each bond was $500. SJW received $50,800 for the bond issue. The bonds paid interest every December 31 at 4%; the market interest rate for bonds with a comparable level of risk was 4.50%. The bonds were convertible to common shares at a rate of 8 common shares per bond. SJW amortized bond premiums and discounts using the effective interest method, and the company's year-end was December 31. SJW 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 $30,380 due to a decrease in market interest rates, a conversion inducement of $25/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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2023, SJW Corporation issued a series of 100 convertible bonds, maturing in 5 years. The face amount of each bond was
$500. SJW received $50,800 for the bond issue. The bonds paid interest every December 31 at 4%; the market interest rate for bonds
with a comparable level of risk was 4.50%. The bonds were convertible to common shares at a rate of 8 common shares per bond. SJW
amortized bond premiums and discounts using the effective interest method, and the company's year-end was December 31. SJW
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 $30,380 due to a decrease in market interest rates, a conversion inducement
of $25/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.
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