On January 1, 2025, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102. Interest is
Question:
On January 1, 2025, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into eight shares of Gottlieb Corporation $100 par value common stock after December 31, 2026.
On January 1, 2027, $400,000 of debentures are converted into common stock, which is then selling at $110. An additional $400,000 of debentures are converted on March 31, 2027. The market price of the common stock is then $115. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis.
Instructions
Make the necessary journal entries for:
a. December 31, 2026.
b. January 1, 2027.
c. March 31, 2027.
d. June 30, 2027.
Record the conversions 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