Bondholders of bonds of Skuirrel Co., Inc., [SKC], with a face value $324,000 converted them into 3,600 of its no par value common shares on July 1, 2008. On that date, these shares were being traded at $51. There was a balance of $12,960 of discount on the bonds remaining unamortized. This balance on July 1, amounted to 40% of the discount recorded on the date when the bonds had been issued. The bond discount is being amortized at $2,430 per interest period. All interest has been recorded and paid up to the date of conversion.

When the bonds had been issued, the equity portion of the issue had been recorded at $3,060. Interest is paid on June 30 and December 31.

For Section VI only, assume SKC is using ASPE.

1) Determine the date on which the bonds were issued.

a. January 1, 2008

b. July 1, 2004

c. January 1, 2000

d. January 1, 2004

e. Cannot be determined from the given data.

2) The journal entry that SKC was required to be made when these convertible bonds were issued.

a. Cash ... DR $327,060; Bonds Payable ... CR $324,000; Contributed Surplus - Conversion ... CR $3,060

b. Cash ... DR $314,100; Bonds Payable ... CR $311,040; Contributed Surplus - Conversion ... CR $3,060

c. Cash ... DR $294,660; Bonds Payable ... CR $291,600; Contributed Surplus - Conversion ... CR $3,060

d. Cash ... DR $327,060; Bonds Payable ... CR $327,060

e. Cash ... DR $81,850; Bonds Payable ... CR $81,850

3) The journal entry that SKC was required to record this conversion transaction would include

a. Common Stock ..... CR $314,100

b. Common Stock ..... CR $291,600; Gain on Conversion of Bonds ..... CR $16,380

c. Common Stock ..... CR $291,600; Contributed Surplus - Conversion ... CR $35,460

d. Common Stock ..... CR $291,600; Gain on Conversion of Bonds ..... CR $16,380

e. None of the above.