Question
I already have some of this one figured out...but can't seem to get the rest: On January 1, 2016, when its $30par value common stock
I already have some of this one figured out...but can't seem to get the rest:
On January 1, 2016, when its $30par value common stock was selling for $80per share, Coronado Corp. issued $10,200,000of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000bond to convert the bond into five shares of the corporation's common stock. The debentures were issued for $11,016,000. The present value of the bond payments at the time of issuance was $8,670,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation's $30par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation's $15par value common stock was selling for $135per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
(a) Prepare the entry to record the original issuance of the convertible debentures. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
Cash
11016000
Bonds Payable
10200000
Premium on Bonds Payable
816000
(b) Prepare the entry to record the exercise of the conversion option, using the book value method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
Bonds Payable
2203200
Premium on Bonds Payable
Common Stock
Paid-in Capital in Excess of Par - Common Stock
Exercise 16-4 On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Coronado Corp. issued $10,200,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation's common stock. The debentures were issued for $11,016,000. The present value of the bond payments at the time of issuance was $8,670,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation's $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation's $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums. (a) Prepare the entry to record the original issuance of the convertible debentures. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Cash Debit Credit 11016000 Bonds Payable 10200000 Premium on Bo 816000 (b) Prepare the entry to record the exercise of the conversion option, using the book value method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Bonds Payable Premium on Bo Debit 2203200 Credit Common Stock Paid-in CapitalStep by Step Solution
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