On January 3, 2019, when Bradley-Link’s common stock had a market price of $32 per share, Bradley-Linkcalled the convertible bonds to force conversion. 90% were converted; the remainder were acquired at the callprice. When the common stock price reached an all-time high of $37 in December of 2017, 40% of the warrantswere exercised.Required:1. Prepare the journal entries that were recorded when each of the two bond issues was originally sold in 2005and 2009.2. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds inJanuary 2019 and the retirement of the remainder.3. Assume Bradley-Link induced conversion by offering $150 cash for each bond converted. Prepare the journalentry to record (book value method) the conversion of 90% of the convertible bonds in January 2019.4. Assume Bradley-Link induced conversion by modifying the conversion ratio to exchange 45 shares for eachbond rather than the 40 shares provided in the contract. Prepare the journal entry to record (book valuemethod) the conversion of 90% of the convertible bonds in January 2019.5. Prepare the journal entry to record the exercise of the warrants in December 2019.
On January 3, 2019, when Bradley-Link’s common stock had a market price of $32 per share, Bradley-Link
called the convertible bonds to force conversion. 90% were converted; the remainder were acquired at the call
price. When the common stock price reached an all-time high of $37 in December of 2017, 40% of the warrants
were exercised.
Required:
1. Prepare the journal entries that were recorded when each of the two bond issues was originally sold in 2005
and 2009.
2. Prepare the
January 2019 and the retirement of the remainder.
3. Assume Bradley-Link induced conversion by offering $150 cash for each bond converted. Prepare the journal
entry to record (book value method) the conversion of 90% of the convertible bonds in January 2019.
4. Assume Bradley-Link induced conversion by modifying the conversion ratio to exchange 45 shares for each
bond rather than the 40 shares provided in the contract. Prepare the journal entry to record (book value
method) the conversion of 90% of the convertible bonds in January 2019.
5. Prepare the journal entry to record the exercise of the warrants in December 2019.
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