Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 14, Problem 14.7MC
To determine
The correct option.
Given information
Number of convertible bonds is 500.
Purchase of convertible bonds by Company W is $518,110.
Face value of each bond is $ 1,000.
The par value of each share is $55.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Nolan Corporation has outstanding convertible bonds with a face value of $15,000 and a current book value of $17,500. Each $1,000 bond is convertible into 25 shares of common stock (par value $5 per share). All the bonds are converted into common stock on June 1 when the market value of Nolan’s common stock is $50 per share.
Required:
Using the book value method, prepare the journal entry for Nolan to record the conversion.
Peach Company has a $1,000 bond that is convertible into 10 shares of common stock (par value $10). At the time of conversion, the unamortized premium is $50. Please write the journal entry to record the conversion of the bonds.
Nolan Corporation has outstanding convertible bonds with a face value of $15,000 and a current book value of $17,500. Each $1,000 bond is convertible into 25 shares of common stock (par value $5 per share). All the bonds are converted into common stock when the market value of Nolan’s common stock is $50 per share. Using the book value method, prepare the journal entry for Nolan to record the conversion
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. 14.4QCh. 14 - When a bond is issued at a discount, will its...Ch. 14 - Prob. 14.6QCh. 14 - Prob. 14.7QCh. 14 - Under IFRS, how do firms account for convertible...Ch. 14 - Prob. 14.9QCh. 14 - Can companies reclassify short-term debt expected...
Ch. 14 - Under IFRS, can companies reclassify short-term...Ch. 14 - Do companies always reclassify long-term debt that...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Prob. 14.15QCh. 14 - Prob. 14.16QCh. 14 - Prob. 14.1MCCh. 14 - Prob. 14.2MCCh. 14 - Prob. 14.3MCCh. 14 - Prob. 14.4MCCh. 14 - Prob. 14.5MCCh. 14 - Clothes Horse Corp. (CHC) Issued 500,000 bonds due...Ch. 14 - Prob. 14.7MCCh. 14 - Prob. 14.8MCCh. 14 - Prob. 14.9MCCh. 14 - Prob. 14.10MCCh. 14 - Prob. 14.11MCCh. 14 - Prob. 14.1BECh. 14 - Notes Payable. Using the information provided in...Ch. 14 - Prob. 14.3BECh. 14 - Prob. 14.4BECh. 14 - Prob. 14.5BECh. 14 - Prob. 14.6BECh. 14 - Bond Terminology. Match each term with its...Ch. 14 - Bond Pricing. Fill in the missing items for each...Ch. 14 - Prob. 14.9BECh. 14 - Bond Issue Price. Using the information from...Ch. 14 - Prob. 14.11BECh. 14 - Prob. 14.12BECh. 14 - Prob. 14.13BECh. 14 - Prob. 14.14BECh. 14 - Prob. 14.15BECh. 14 - Prob. 14.16BECh. 14 - Prob. 14.17BECh. 14 - Prob. 14.18BECh. 14 - Bonds Issued between Interest Payment Dates. For...Ch. 14 - Prob. 14.20BECh. 14 - Prob. 14.21BECh. 14 - Prob. 14.22BECh. 14 - Prob. 14.23BECh. 14 - Prob. 14.24BECh. 14 - Prob. 14.25BECh. 14 - Prob. 14.26BECh. 14 - Prob. 14.27BECh. 14 - Prob. 14.28BECh. 14 - Prob. 14.29BECh. 14 - Prob. 14.30BECh. 14 - Short-Term Debt Expected to Be Refinanced, IFRS....Ch. 14 - Prob. 14.32BECh. 14 - Prob. 14.33BECh. 14 - Prob. 14.34BECh. 14 - Prob. 14.35BECh. 14 - Fair Value Option. Saratoga Company issued bonds...Ch. 14 - Prob. 14.37BECh. 14 - Financial Statement Disclosure. Use the following...Ch. 14 - Prob. 14.1ECh. 14 - Prob. 14.2ECh. 14 - Prob. 14.3ECh. 14 - Prob. 14.4ECh. 14 - Prob. 14.5ECh. 14 - Bond Issue, Interest Payments, Effective Interest...Ch. 14 - Prob. 14.7ECh. 14 - Prob. 14.8ECh. 14 - Prob. 14.9ECh. 14 - Prob. 14.10ECh. 14 - Prob. 14.11ECh. 14 - Prob. 14.12ECh. 14 - Convertible Bonds, Conversion. On January 1, 2018,...Ch. 14 - Convertible Bonds, Conversion. Using the...Ch. 14 - Prob. 14.15ECh. 14 - Prob. 14.16ECh. 14 - Prob. 14.17ECh. 14 - Prob. 14.18ECh. 14 - Warrants. DHC Associates issued 2,100 of its...Ch. 14 - Prob. 14.20ECh. 14 - Prob. 14.21ECh. 14 - Prob. 14.1PCh. 14 - Long-Term Notes Payable, Semiannual Interest,...Ch. 14 - Note Payable Issued at a Discount with...Ch. 14 - Prob. 14.4PCh. 14 - Prob. 14.5PCh. 14 - Bond Issue, Interest Payments, Effective Interest...Ch. 14 - Prob. 14.7PCh. 14 - Bonds Sold between Interest Dates at a Discount,...Ch. 14 - Prob. 14.9PCh. 14 - Prob. 14.10PCh. 14 - Convertible Bonds, Bond Issue Costs, Conversion....Ch. 14 - Prob. 14.12PCh. 14 - Prob. 14.13PCh. 14 - Prob. 1JCCh. 14 - Prob. 2JCCh. 14 - Prob. 3JCCh. 14 - Prob. 1FSCCh. 14 - Prob. 1SSCCh. 14 - Surfing the Standards Case 2: Bonds with...Ch. 14 - Prob. 1BCC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- At the beginning of the current year, ABC Corporation issued 6,000, 5-year bonds, face value 1,000 each at 105. The bonds has a conversion privilege that provides for an exchange of a 1,000 bond for 20 shares of capital, par 50. Without such conversion privilege, the bonds would only sell at 98. Prepare the entries in connection with the issuance of the bonds and the conversion of the bonds at the end of the current year. U :=arrow_forwardOn July 1, 2020, Tuttle Company had bonds payable outstanding with a face value of $100,000 and a book value of $93,000. The interest on these bonds was paid on June 30. When these bonds were issued, each $1,000 bond was convertible into 25 shares of $10 par common stock. To induce conversion, on June 15, 2020, the terms were changed so that each bond was convertible into 28 shares of common stock if the conversion was made within 30 days. All the bonds were converted on July 1, 2020, when the market price of the common stock was $42 per share. Required: Next Level Using the book value method, record the conversion of the bonds on July 1, 2020. PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4 5arrow_forwardZotar Company has bonds payable outstanding in the amount of $5,600,000, and the Premium on Bonds Payable account has a balance of $150,000. Each $1,000 bond is convertible into 10 shares of common stock with a par value of $1 per share. All bonds are converted into common stock.InstructionsPrepare the journal entry for the conversion assuming the book value method was used.arrow_forward
- On July 1, 2020, Tuttle Company had bonds payable outstanding with a face value of $350,000 and a book value of $345,000. The interest on these bonds was paid on June 30. When these bonds were issued, each $1,000 bond was convertible into 20 shares of $10 par common stock. To induce conversion, on June 15, 2020, the terms were changed so that each bond was convertible into 22 shares of common stock if the conversion was made within 30 days. All the bonds were converted on July 1, 2020, when the market price of the common stock was $48 per share. Required: Next Level Using the book value method, record the conversion of the bonds on July 1, 2020.arrow_forwardJames Company has outstanding 3,000, $1,000 bonds. Each bond is convertible into 50 shares of $12 par value common stock. The bonds are converted on December 31, 2018. The unamortized discount is $40,000 and the market price of the stock is $35 per share. Record the conversion of the bonds for James Company.arrow_forwardOn 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.arrow_forward
- Blossom Corporation has outstanding 2,000 of $1,000 bonds, each convertible into 70 shares of $10 par value common stock. The bonds are converted on December 31, 2025, when the unamortized discount is $28,000 and the market price of the stock is $21 per share. Record the conversion using the book value approach. (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.) Account Titles and Explanation Debit Creditarrow_forwardSweet Company has bonds payable outstanding in the amount of $650,000, and the Premium on Bonds Payable account has a balance of $7,700. Each $1,000 bond is convertible into 20 shares of preferred stock of par value of $50 per share. All bonds are converted into preferred stock.Assuming that the book value method was used, what entry would be made?arrow_forwardOn July 1, 2023, Tien Limited called its 9% convertible bonds for conversion. The $10 million of par value bonds were converted into 1 million common shares. On July 1, there was $75,000 of unamortized discount applicable to the bonds, and the company paid an additional $65,000 to the bondholders to induce conversion of all the bonds. At the time of conversion, the balance in the account Contributed Surplus—Conversion Rights was $270,000, and the bond’s fair value (ignoring the conversion feature) was $9,955,000. The company records conversion using the book value method. Prepare the journal entries if Tien prepares its financial statements using IFRS and if it uses ASPE. Can someone please explain what the difference is between IFRS and ASPE and how they got the number in the journal entries, thanks! Please donot provide solution in image format provide solution in step by step format and fast solutionarrow_forward
- Crane Company has $3930000 of 7% convertible bonds outstanding. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2021, the holders of $1230000 bonds exercised the conversion privilege. On that date the market price of the bonds was 106 and the market price of the common stock was $36. The total unamortized bond premium at the date of conversion was $277000. Crane should record, as a result of this conversion, a loss of $12300. credit of $88640 to Premium on Bonds Payable. credit of $183270 to Paid-in Capital in Excess of Par. credit of $208870 to Paid-in Capital in Excess of Par.arrow_forwardOn 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 Creditarrow_forwardSandhill Ltd. sold 10-year, 5% convertible bonds with face value $1,590,000. The bonds pay interest December 31 each year. Sandhill follows ASPE. Each bond was convertible into 530 Sandhill common shares. The sale resulted in a value for the convertible option of $279,000. On January 2, 2024, Sandhill offered a cash payment of $33,000 to bondholders if they would convert their bonds into common shares. All of the bondholders agreed. At the time, the market value of the bonds was $1,379,000 and the carrying value on Sandhill's books was $1,362,000. Prepare the journal entry to record the early retirement of the bonds. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Creditarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education