For each of the unrelated transactions described below, present the entry (entries) required to record each transaction.
Question:
For each of the unrelated transactions described below, present the entry (entries) required to record each transaction.
1. Grand Corp. issued $20,000,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company’s investment banker estimates they would have been sold at 95.
2. Hoosier Company issued $20,000,000 par value 10% bonds at 98. One detachable stock purchase warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $4.
3. Suppose Sepracor, Inc. called its convertible debt in 2025. Assume the following related to the transaction. The 11%, $10,000,000 par value bonds were converted into 1,000,000 shares of $1 par value common stock on July 1, 2025. On July 1, there was $55,000 of unamortized discount applicable to the bonds, and the company paid an additional $75,000 to the bondholders to induce conversion of all the bonds. The company records the conversion using the book value method.
Step by Step Answer:
Intermediate Accounting
ISBN: 9781119790976
18th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield