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Problem 6-8 (IAA)

Problem 6-8 (IAA)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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bonds are queted at 101. Problem 6-8 (IAA) Sunshine Company issued 4-year P5,000,000 face value of 12% convertible bonds at 105 on January 1, 2013, maturing on January 1, 2018 and paying interest annually on December 31. It is reliably ascertained that the bonds would sell at P4,700,000 without the conversion feature with an effective yield of 14%. Eaclh P1,000 bond is convertible into 8 shares of P100 par value share capital, On December 31, 2013, all of the bonds are converted into share capital. At this time, the share has a market value of P150 and the Required: 1. Prepare journal entry to record the issuance of the bond on January 1, 2013. 2. Prepare journal entry to record the interest payment and amortization for 2013. The effective interest method of amortization is used. 3. Prepare journal entry to record the conversion of bonds on December 31, 2013.
Transcribed Image Text:bonds are queted at 101. Problem 6-8 (IAA) Sunshine Company issued 4-year P5,000,000 face value of 12% convertible bonds at 105 on January 1, 2013, maturing on January 1, 2018 and paying interest annually on December 31. It is reliably ascertained that the bonds would sell at P4,700,000 without the conversion feature with an effective yield of 14%. Eaclh P1,000 bond is convertible into 8 shares of P100 par value share capital, On December 31, 2013, all of the bonds are converted into share capital. At this time, the share has a market value of P150 and the Required: 1. Prepare journal entry to record the issuance of the bond on January 1, 2013. 2. Prepare journal entry to record the interest payment and amortization for 2013. The effective interest method of amortization is used. 3. Prepare journal entry to record the conversion of bonds on December 31, 2013.
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