Question
Convertible Bonds Clarkston Inc. issued $1,000,000 of convertible 10-year, 11% bonds on July 1, 2012. The interest is payable semiannually on January 1 and July
Convertible Bonds
Clarkston Inc. issued $1,000,000 of convertible 10-year, 11% bonds on July 1, 2012. The interest is payable semiannually on January 1 and July 1. The discount in connection with the issue was $9,500, which is amortized monthly using the straight-line basis. The debentures are convertible after one year into five shares of the company's $1 par common stock for each $1,000 of bonds.
On August 1, 2013, $100,000 of the bonds were converted. Interest has been accrued monthly and paid as due. Any interest accrued at the time of conversion of the bonds is paid in cash.
Prepare the journal entries on Clarkston's books to record the conversion, amortization, and interest on the bonds as of August 1 and August 31, 2013. On the bond issuance date, it had been at least reasonably possible that the bonds would eventually be converted. If required, round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Interest Payable | |||
Cash | 1,000,000 | ||
Payment Accured on Interest on Conversion.
| 100,000 | ||
Discount on Bonds Payable | |||
Common Stock (500 shares) | 500 | ||
Paid-In Capital in Excess of Par | |||
Conversion of $100,000 of bonds. | |||
Interest Expense | |||
Discount on Bonds Payable | |||
Interest Payable | |||
Monthly Accrual of Interest. | |||
Thank you, for your assistance. My last question I submitted was incorrect. Please help!!
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