On December 31, 2012, Zugaboo Corp. issues 5%, 10-year convertible bonds payable with a maturity value of

Question:

On December 31, 2012, Zugaboo Corp. issues 5%, 10-year convertible bonds payable with a value of $5,000,000. The semiannual interest dates are June 30 and December 31. The market interest rate is 6%, and the issue price of the bonds is 92.56. Zugaboo 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, 2012. Credit Convertible Bonds Payable.
b. Payment of interest and amortization of the bonds on June 30, 2013.
c. Payment of interest and amortization of the bonds on December 31, 2013.
d. Conversion by the bondholders on July 1, 2014, of bonds with of $2,000,000 into 90,000 shares of Zugaboo Corp. $1-par common stock.
3. Show how Zugaboo Corp. would report the remaining bonds payable on its at
December 31, 2014.

Balance Sheet
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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
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