On July 1, 2021, an interest payment date, $143000 of Crane Company bonds were converted into 2900 shares of Crane Company common stock each having a par value of $45 and a market value of $52. There is $5000 unamortized discount on the bonds. Using the book value method, Crane would record a $7500 increase in paid-in capital in excess of par. a $12800 increase in paid-in capital in excess of par. no change in paid-in capital in excess of par. a $7800 increase in paid-in capital in excess of par.

On July 1, 2021, an interest payment date, $143000 of Crane Company bonds were converted into 2900 shares of Crane Company common stock each having a par value of $45 and a market value of $52. There is $5000 unamortized discount on the bonds. Using the book value method, Crane would record a $7500 increase in paid-in capital in excess of par. a $12800 increase in paid-in capital in excess of par. no change in paid-in capital in excess of par. a $7800 increase in paid-in capital in excess of par.

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 21E: On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be...

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Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were issued on May 4. The 7% convertible bonds have a face value of 80,000 and were issued in 2016 at par. Each 1,000 bond is convertible into 25 shares of common stock; to date, none of the bonds have been converted. During 2019, the company earned net income of 79,200 and was subject to an income tax rate of 30%. Required: Compute the 2019 diluted earnings per share.
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.
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