Canada

On January 1, 2021, Alpha, Inc., issued 2,600 of its' 5% 10-year convertible bonds, par value $1,000 at 130. Included with each bond were 25 detachable warrants. Each warrant entitled its holder to purchase one share from Alpha at a price of $28. Further, each $1,000 bond was convertible, at the option of the holder, into 40 common shares. Interest was to be paid by the company on June 30 and December 31. The underwriter estimated the market value of the blonds alone, excluding warrants and conversion rights, to be $2,900,000. Similar warrants were being traded at a market value of $5 each at the date of issue. The company uses ASPE for its accounts and amortizes the bonds using straight line and uses the residual value method to account for bond issuances. 7] The correct journal entry to record bonds issuance is: Elect one: a. (dr) bonds payable $2,900,000; (cr) Cash $3,380,000; (cr) Contributed surplus- warrants $311,000; (cr) Contributed surplus-Conversion rights $169,000. b. (dr) Cash $3,380,000; (cr) bonds payable $2,900,000; (cr) Contributed surplus- warrants $325,000; (cr) Contributed surplus- Conversion rights $ 155,000. c. (dr) Cash $3,380,000; (cr) bonds payable $3,380,000. d. (dr) Cash $3,380,000; (cr) bonds payable $2,900,000; (cr) Contributed surplus-warrants $480,000. ] The correct journal entry to record the interest expense on June 30, 2021 is: ect one: a. (dr) interest expense $50,000; (dr) bonds payable $15,000; (cr) cash $65,000. b. (dr) interest expense $65,000; (cr) cash $65,000. C. (dr) interest expense $72,500; (cr) bonds payable $7,500; (cr) cash $65,000. d. (dr) interest expense $80,000; (cr) bonds payable $15,000; (cr) cash $65,000 2. None of the above. [39] On July 1, 2024, 85% of the warrants outstanding were submitted to purchase shares. The market price of the shares was $51 each on that day. The appropriate journal entry to record this transaction would be: Select one: O a. (dr) Cash $1,547,000; (dr) Contributed surplus- Warrants $325,000; (cr) Common shares $1,872,000. Ob. (dr) Cash $1,820,000; (dr) Contributed surplus-Warrants $325,000; (cr) Common shares $2,145,000. Oc. (dr) Cash $2,817,750; (cr) Contributed surplus-Warrants $65,000; (cr) Common shares $2,752,750. Od. (dr) Cash $1,547,000; (dr) Contributed surplus - Warrants $276,250; (cr) Common shares $1,823,250. Oe. None of the above. [40] On January 1, 2025, after recording and paying off all interest due, 70% of the bondholders submitted their respective bonds for conversion. The company's shares were being traded at $34 on that day. Using the book value method, the journal entry to record the conversion transaction would be: Select one: od a. (dr) bonds payable $2,030,00; (dr) Contributed surplus- Conversion rights $4451200; (cr) Common Shares $2,475,200 Ob. (dr) bonds payable $1,946,000; (dr) Contributed surplus- Conversion rights $145,200; (cr) Common Shares $2,091,200. Oc. c. (dr) bonds payable $1,946,000; (dr) Contributed surplus- Conversion rights $108,500; (cr) Common Shares $2,054,500. Od. (dr) bonds payable $2,366,700; (dr) Contributed surplus- Conversion rights $108,500; (cr) Common Shares $2,475,200. Oe. None of the above. [41] How many shares would have been issued from the bond conversion in Question 40? Select one: O a. 72,800. Ob. 104,000. Od c. 81,200. O d. 88,400. Oe. None of the above