Swifty Inc. issued $1,920,000 of convertible 10-year bonds on July 1, 2025. The bonds provide for 12% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $49,200, which is being amortized monthly on a straight-line basis. The bonds are convertible after one year into 8 shares of Swifty Inc.'s $100 par value common stock for each $1,000 of bonds. On August 1, 2026, $192,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash. Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates. (List all debit entries before credit entries. Credit account titles are automatically indented when 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) a. b. C. August 1, 2026. (Assume the book value method is used.) August 31, 2026. December 31, 2026, including closing entries for end-of-year.
Swifty Inc. issued $1,920,000 of convertible 10-year bonds on July 1, 2025. The bonds provide for 12% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $49,200, which is being amortized monthly on a straight-line basis. The bonds are convertible after one year into 8 shares of Swifty Inc.'s $100 par value common stock for each $1,000 of bonds. On August 1, 2026, $192,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash. Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates. (List all debit entries before credit entries. Credit account titles are automatically indented when 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) a. b. C. August 1, 2026. (Assume the book value method is used.) August 31, 2026. December 31, 2026, including closing entries for end-of-year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Swifty Inc. issued $1,920,000 of convertible 10-year bonds on July 1, 2025. The bonds provide for 12% interest payable semiannually
on January 1 and July 1. The discount in connection with the issue was $49,200, which is being amortized monthly on a straight-line
basis.
The bonds are convertible after one year into 8 shares of Swifty Inc.'s $100 par value common stock for each $1,000 of bonds.
On August 1, 2026, $192,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid
as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash.
Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates.
(List all debit entries before credit entries. Credit account titles are automatically indented when 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.)
a.
b.
C.
No.
a.
August 1, 2026. (Assume the book value method is used.)
August 31, 2026.
December 31, 2026, including closing entries for end-of-year.
Date
Aug. 1.
2026
Account Titles and Explanation
Bonds Payable
Discount on Bonds Payable.
Common Stock
Paid-in Capital in Excess of Par-Common Stock
(To record the issuance of shares of common stock and
the write-off of the discount on bonds payable.)
Debit
1920000
Credit
4387
SUPPORT
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