Question
For each of the unrelated transactions described below, present the entry(ies) required to record the bond transactions. On August 1, 2020, Malia Corporation called its
For each of the unrelated transactions described below, present the entry(ies) required to record the bond transactions.
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On August 1, 2020, Malia Corporation called its 10% convertible bonds for conversion. The 8,000,000 par bonds were converted into 320,000 shares of 20 par ordinary shares. On August 1, there was 700,000 of unamortized premium applicable to the bonds. The Share PremiumConversion Equity account had a balance of 300,000. The fair value of the ordinary shares was 20 per share. Ignore all interest payments.
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Henri Willig, Inc. decides to issue convertible bonds instead of ordinary shares. The company issues 10% convertible bonds, par 3,000,000, at 97. The investment banker indicates that if the bonds had not been convertible they would have sold at 94.
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Hakeem Company issues 5,000,000 of bonds with a coupon rate of 8%. To help the sale, detachable share warrants are issued at the rate of ten warrants for each 1,000 bond sold. It is estimated that the fair value of the bonds without the warrants is 4,935,000. The bonds with the warrants sold at 101.
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