On December 31, 2010, Mugaboo Corp. issues 7%, 10-year convertible bonds payable with a maturity value of

Question:

On December 31, 2010, Mugaboo Corp. issues 7%, 10-year convertible bonds payable with a value of $3,000,000. The semiannual interest dates are June 30 and December 31. The market interest rate is 8%, and the issue price of the bonds is 93.165. Mugaboo Corp. amortizes bonds by the effective-interest method.

Requirements
1. Prepare an effective-interest method amortization table for the first four semiannual interest periods.
2. Journalize the following transactions:
a. Issuance of the bonds on December 31, 2010. Credit Convertible Bonds Payable.
b. Payment of interest and amortization of the bonds on June 30, 2011.
c. Payment of interest and amortization of the bonds on December 31, 2011.
d. Conversion by the bondholders on July 1, 2012, of bonds with of $1,200,000 into 40,000 shares of Mugaboo Corp.’s $1-par common stock.
3. Show how Mugaboo Corp. would report the remaining bonds payable on its at December 31, 2012.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... 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...