bonds are queted at 101.Problem 6-8 (IAA)Sunshine Company issued 4-year P5,000,000 face value of12% convertible bonds at 105 on January 1, 2013, maturingon January 1, 2018 and paying interest annually on December31.It is reliably ascertained that the bonds would sell atP4,700,000 without the conversion feature with an effectiveyield of 14%.Eaclh P1,000 bond is convertible into 8 shares of P100 parvalue share capital, On December 31, 2013, all of the bondsare converted into share capital.At this time, the share has a market value of P150 and theRequired:1. Prepare journal entry to record the issuance of the bondon January 1, 2013.2. Prepare journal entry to record the interest payment andamortization for 2013. The effective interest method ofamortization is used.3. Prepare journal entry to record the conversion of bondson December 31, 2013.

These are the accounting transactions that are having a monetary impact on the financial statement…

Answered: Problem 6-8 (IAA)

Business

Accounting

Problem 6-8 (IAA)

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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Question

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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