Joy Insurance decides to finance expansion of its physical facilities by issuing convertible debenture bonds The terms of the bonds follow maturity date 10 years after May 1, 2012, the date of issuance conversion at option of holder after two years 20 shares of $1 par value stock for each $1,000 bo...

2012 1 July 1 Cash 1854000 Bonds Payable 1800000 Premium on Bonds Pa ...

Joy Insurance decides to finance expansion of its physical facilities by issuing convertible debenture bonds. The terms

Question:

Joy Insurance decides to finance expansion of its physical facilities by issuing convertible debenture bonds. The terms of the bonds follow: date 10 years after May
1, 2012, the date of issuance; conversion at option of holder after two years; 20 shares of $1 stock for each $1,000 bond held; interest rate of 12% and call provision on the bonds of 102. The bonds were sold at 101.
1. Give the entry on Joy's books to record the sale of $1,800,000 of bonds on July 1, 2012; interest payment dates are May 1 and November 1.
2. Assume the same condition as in (1) except that the sale of the bonds is to be recorded in a manner that will recognize a value related to the conversion feature. The estimated sales price of the bonds without the conversion feature is 98.
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...