8. Accounting for Convertible Debt and Debt Issued with Stock Warrants (10 points)

For each of the unrelated transactions described below, present the journal entry(ies) required to record each transaction.

a. Kelce Corp. issued $1,000,000 par value 6.5% convertible bonds at 103. If the bonds had not been convertible, the companys investment banker estimates they would have been sold at par. (2 pts)

b. Kelce Corp. issued $10,000,000 par value 4.25% bonds at 102. Two detachable stock warrants were issued with each $1,000 par value bond. At the time of issuance, the warrants were selling for $12.00. Kelce uses the incremental method and the fair value of the warrants is more readily determinable than is the fair value of the bonds. (4 pts)

c. On 1 January 2023, Kelce Corp. called its 3% convertible bonds for conversion. The $4,000,000 par value bonds were converted into 80,000 shares of $1 par value common stock. On 1 January, there was $25,000 of unamortized premium applicable to the bonds, and the company paid an additional $50,000 to the bondholders to induce conversion of all the bonds. The company records the conversion using the book value method. (4 pts)

8. Accounting for Convertible Debt and Debt Issued with Stock Warrants (10 points) For each of the unrelated transactions described below, present the journal entry(ies) required to record each transaction. a. Kelce Corp. issued $1,000,000 par value 6.5% convertible bonds at 103 . If the bonds had not been convertible, the company's investment banker estimates they would have been sold at par. (2 pts) b. Kelce Corp. issued $10,000,000 par value 4.25% bonds at 102 . Two detachable stock warrants were issued with each $1,000 par value bond. At the time of issuance, the warrants were selling for $12.00. Kelce uses the incremental method and the fair value of the warrants is more readily determinable than is the fair value of the bonds. ( 4pts) c. On 1 January 2023 , Kelce Corp. called its 3% convertible bonds for conversion. The $4,000,000 par value bonds were converted into 80,000 shares of $1 par value common stock. On 1 January, there was $25,000 of unamortized premium applicable to the bonds, and the company paid an additional $50,000 to the bondholders to induce conversion of all the bonds. The company records the conversion using the book value method. (4 pts)