Explanation Convertible Bonds: Convertible Bonds are the financial instruments that enable the holder to covert the bonds into a specified number of shares of common stock or preferred shares. Journalizing: Journalizing is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the accounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. Following is the Journal entry recorded for issuance of convertible debt or bond: Date Particulars Post ref. Debit ($) Credit ($) Bonds payable 1,000,000 Additional paid up Capital 160,000 Discount on Bonds Payable 87,000 Common Stock 1,073,000 ( being the adjustment of bonds value on the date of conversion recorded ) Table (1) Bonds payable is a liability for the company, as the company need to pay back them in the future, indicating increase in the liability hence credited with $1,000,000. Paid-up Capital is capital in nature. There is decrease in the paid-up capital indicating decrease in the capital account, hence debited. Discount is an income for the company as the company is providing benefit to the investors...

2nd Edition

ISBN: 9780134730370

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Chapter 14, Problem 14.17E

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To prepare: The journal entry to record the adjustment of bonds value on the date of conversion.

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Chapter 14, Problem 14.16E

Chapter 14, Problem 14.18E

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Chapter 14 Solutions

Intermediate Accounting (2nd Edition)

Ch. 14 - What conditions or terms does a note payable...Ch. 14 - If the market rate of interest exceeds the face or...Ch. 14 - What is included in bond issue costs and how...Ch. 14 - Prob. 14.4Q Ch. 14 - When a bond is issued at a discount, will its...Ch. 14 - Prob. 14.6Q Ch. 14 - Prob. 14.7Q Ch. 14 - Under IFRS, how do firms account for convertible...Ch. 14 - Prob. 14.9Q Ch. 14 - Can companies reclassify short-term debt expected...

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The journal entry to record the adjustment of bonds value on the date of conversion.

Solution Summary: The author explains the process of journalizing the transactions of an organization in a chronological order.

To prepare: The journal entry to record the adjustment of bonds value on the date of conversion.

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Chapter 14 Solutions