On September 30, 2023, Sunland Inc. issued $3,280,000 of 10-year, 8% convertible bonds for $3,772,000. The bonds pay interest on March 31 and September30 and mature on September 30, 2033. Each $1,000 bond can be converted into 80 no par value common shares. In addition, each bond included 20 detachablewarrants. Each warrant can be used to purchase one common share at an exercise price of $15. Immediately after the bond issuance, the warrants traded at $3each. Without the warrants and the conversion rights, the bonds would have been expected to sell for $3,444,000.On March 23, 2026, half of the warrants were exercised. The common shares of Sunland were trading at $20 each on this day.Immediately after the payment of interest on the bonds, on September 30, 2028, all bonds outstanding were converted into common shares. Assume the entityfollows IFRS.(e)Your answer is partially correct.Prepare the journal entry to account for the exercise of the warrants on March 23, 2026. (Credit account titles are automatically indented when the amount is entered. Do not indemanually. Round answers to O decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entrDateMarch 23, 2026Account Titles and ExplanationCashContributed Surplus - Stock WarrantsCommon SharesHow many common shares were issued in this transaction?Common shares issued1148000 shares.Debit984000164000Credit1148000

The exercise of warrants represents a financial event that involves the conversion of detachable…

Prepare the journal entry to account for the exercise of the warrants on March 23, 2026. (Credit ac manually. Round answers to O decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the c

Prepare the journal entry to account for the exercise of the warrants on March 23, 2026. (Credit ac manually. Round answers to O decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the c

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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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.
On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
On September 30, 2023, Blossom Inc. issued $3,210,000 of 10-year, 8% convertible bonds for $3,723,600. The bonds pay interest on March 31 and September 30 and mature on September 30, 2033. Each $1,000 bond can be converted into 80 no par value common shares. In addition, each bond included 20 detachable warrants. Each warrant can be used to purchase one common share at an exercise price of $15. Immediately after the bond issuance, the warrants traded at $3 each. Without the warrants and the conversion rights, the bonds would have been expected to sell for $3,402,600. On March 23, 2026, half of the warrants were exercised. The common shares of Blossom were trading at $20 each on this day. Immediately after the payment of interest on the bonds, on September 30, 2028, all bonds outstanding were converted into common shares. Assume the entity follows I FRS. Prepare the journal entry to record the issuance of the bonds on September 30, 2023. (Credit account titles are automatically indented…
On September 30, 2023, Cullumber Inc. issued $3,120,000 of 10-year, 8% convertible bonds for $3,494,400. The bonds pay interest on March 31 and September 30 and mature on September 30, 2033. Each $1,000 bond can be converted into 80 no par value common shares. In addition, each bond included 20 detachable warrants. Each warrant can be used to purchase one common share at an exercise price of $15. Immediately after the bond issuance, the warrants traded at $3 each. Without the warrants and the conversion rights, the bonds would have been expected to sell for $3,182,400. On March 23, 2026, half of the warrants were exercised. The common shares of Cullumber were trading at $20 each on this day. Immediately after the payment of interest on the bonds, on September 30, 2028, all bonds outstanding were converted into common shares. Assume the entity follows IFRS. (a) Prepare the journal entry to record the issuance of the bonds on September 30, 2023. (Credit account titles are automatically…
On July 1, 2023, Pharoah Ltd., which follows ASPE, issued 1,000 convertible, five-year, $1,000 bonds. Each bond is convertible into 20 common shares at the bondholder's option. On the date of issuance, the bond's conversion rights were valued at $51,000. On July 1, 2026, the bonds had a carrying value on Pharoah's books of $969,000, and the fair market value of the bonds without the convertible option was $973,000. (a) Assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2026. Prepare the journal entry to record the conversion. (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. List all debit entries before credit entries.) Account Titles and Explanation Bonds Payable Common Shares Contributed Surplus - Conversion Rights Debit Credit
On July 1, 2023, Sandhill Ltd., which follows ASPE, issued 1,000 convertible, five-year, $1,000 bonds. Each bond is convertible into 20 common shares at the bondholder's option. On the date of issuance, the bond's conversion rights were valued at $50,000. On July 1, 2026, the bonds had a carrying value on Sandhill's books of $971,000, and the fair market value of the bonds without the convertible option was $975,000. (a) Assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2026. Prepare the journal entry to record the conversion. (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 O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Debit Credit
On December 1, 2020, the ABC corporation issued 500 bonds with a par value of $ 1,000 at 9%, at 103. Each bond was sold with a detachable stock warrant that owed the bondholder's right to purchase. 10 ABC common shares for each bond. At the issuance date, the market value of the bonds without the purchase agreements was 95, and the market value of each Purchase Certificate was $ 50. What amount of money received in this issue should be allocated to the initial book value of the bonds payable? a. $500,000. b. $489,250. c. $515,000. d. $484,100.
On March 1, 2025, Cullumber Corporation issued $1920000 of 8% nonconvertible bonds at 104. The bonds are due on February 28, 2041. In addition, each $1000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase. one share of Cullumber's $25 par value common stock for $50. The bonds without the warrants would sell at 95. On March 1, 2025, the fair value of Cullumber's common stock was $40 per share and the fair value of the warrants was $2 per stock warrant. What amount should Cullumber record on March 1, 2025 as paid-in capital from stock warrants? O $81040 O $70240 O $99840 O $96000
On July 1, 2020, an interest payment date, $200,000 of Pride Co. bonds were converted into 12,000 shares of Pride Co.common stock each having a par value of $18 and a market value of $21. There is $10,000 unamortized premium on the bonds. Using the book value method, Pride would record the unamortized premium as: Debit Premium on Bonds Payable $10,000 O Debit Discount on Bonds Payable - $10,000 O Credit Premium on Bonds Payable - $10,000 O Credit Discount on Bonds Payable $10,000 ASA GRLLEE