ACCOUNTING FOR LIABILITIES AND EQUITIES

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ABC Limited needs Sh 2 million for additional financing. On December 31, 2014, it borrowed money by issuing Sh 500,000, 11%, 10-year convertible bonds. The bond sold at face value and pay semi -annual interest on January 1 and July 1. Each Sh 1,000 bond is convertible into 30 shares of Cynthia Inc. Sh 20 par value common stock. Prepare journal entries for:

a)Issuance of the bonds on January 1, 2015.

b)Interest expense on July 1, and December 31, 2015.

c)The payment of interest on January 1, 2016.

d)The conversion of all bonds to common stock on January 1, 2016, when the market value of common stock was Sh 67 per share.