On January 1, 2023, Vaughn Corporation, which follows ASPE, issued a series of 502 convertible bonds, maturing in five years. The face amount of each bond was $1,000. Vaughn received $532,200 for the bond issue. The bonds paid interest every December 31 at 5%; the market interest rate for bonds with a comparable level of risk was 6%. The bonds were convertible to common shares at a rate of ten common shares per bond. Vaughn amortized bond premiums and discounts using the effective interest method, and the company's year-end was December 31. On January 1, 2024, 100 of the bonds were converted into common shares. On June 30, 2024, another 100 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 $297,200 due to a decrease in market interest rates, a conversion inducement of $20/bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 302 bonds were converted into common shares at that 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, Vaughn Corporation, which follows ASPE, issued a series of 502 convertible bonds, maturing in five years. The face amount of each bond was $1,000. Vaughn received $532,200 for the bond issue. The bonds paid interest every December 31 at 5%; the market interest rate for bonds with a comparable level of risk was 6%. The bonds were convertible to common shares at a rate of ten common shares per bond. Vaughn amortized bond premiums and discounts using the effective interest method, and the company's year-end was December 31. On January 1, 2024, 100 of the bonds were converted into common shares. On June 30, 2024, another 100 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 $297,200 due to a decrease in market interest rates, a conversion inducement of $20/bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 302 bonds were converted into common shares at that 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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answer in text form please (without image), Note: .Every entry should have narration please
Transcribed Image Text:On January 1, 2023, Vaughn Corporation, which follows ASPE, issued a series of 502 convertible bonds, maturing in five years. The
face amount of each bond was $1,000. Vaughn received $532,200 for the bond issue. The bonds paid interest every December 31 at
5%; the market interest rate for bonds with a comparable level of risk was 6%. The bonds were convertible to common shares at a rate
of ten common shares per bond. Vaughn amortized bond premiums and discounts using the effective interest method, and the
company's year-end was December 31.
On January 1, 2024, 100 of the bonds were converted into common shares. On June 30, 2024, another 100 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 $297,200 due to a decrease in market interest rates, a conversion
inducement of $20/bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 302
bonds were converted into common shares at that 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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