On December 31, 2018, Mainland Corporation issues 6%, 10-year convertible bonds payable with a face value of

Question:

On December 31, 2018, Mainland Corporation issues 6%, 10-year convertible bonds payable with a face value of $4,000,000. The semiannual interest dates are June 30 and December 31. The market interest rate is 8%. Mainland amortizes bond discounts using the effective-interest method.

Requirements

1. Use the PV function in Excel to calculate the issue price of the bonds.

2. Prepare an effective-interest method amortization table for the term of the bonds using Excel.

3. Journalize the following transactions:

a. Issuance of the bonds on December 31, 2018. Credit Convertible Bonds Payable.

b. Payment of interest and amortization of the bond discount on June 30, 2019.

c. Payment of interest and amortization of the bond discount on December 31, 2019.

d. Conversion by the bondholders on July 1, 2020, of bonds with a total face value of $1,600,000 into 80,000 shares of Mainland’s $1-par common stock.

4. Show how Mainland would report the remaining bonds payable on its balance sheet at December 31, 2020.

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... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... 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...

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