3C

Master Machinery Corporation issued 78 12-year, 10% convertible bonds at par. Each bond had a par value of $1,000 and pays interest annually on December 31. Because the bonds were issued at par, the yield on the bond is also equal to 10%. Each $1,000 bond converts into 25 shares of $5 par value common stock at the option of the bondholder beginning two years after the date of issue. Bond issue costs are $504. The market price of the common stock on the conversion date was equal to $68 per share. Any discount is amortized using the straight-line method.

Prepare the journal entry to record the bond issuance

4D

Tilton Company issued 12,000 of its $1,000 par value bonds for $1,300, providing total cash proceeds of $15,600,000. Tilton did not incur any bond issue costs. Bond interest is paid annually. The market price of Tilton's common shares on the date the bonds were issued was $140 per share. The bonds were sold with 22,200 warrants to acquire 22,200 shares of the company's $5 par value common stock for $140 per share. Tilton has existing bonds outstanding that trade without warrants at $1,250. There are other Tilton warrants outstanding that trade for $101.50 each. The market value of the company's bonds is considered more reliable than the trading price of the warrants.

Prepare the journal entry to record issuance of the bonds assuming that the warrants are non-detachable.

Account Date of issue

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