I've got 7 questions completed in this assignment but the last three are killing me. I've read the ebook but my entries are clearly incorrect...any help? How do you find the correct formulas? any suggestions??? These Q's are about recording bond issuance and convertible bonds.
On January 1, 2015, when its $30 par value common stock was selling for $70 per share, a corporation issued $20 million of 12% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert it into six shares of the corporation's $30 par value common stock. The debentures were issued for $21 million. At the time of issuance, the present value of the bond payments was $18.50 million, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2016, the corporation's $30 par value common stock was split 3 for 1. On January 1, 2017, when the corporation's $10 par value common stock was selling for $80 per share, holders of 40% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums. Required: 1. Prepare the journal entry to record the original issuance of the convertible debentures. 2. Prepare the journal entry to record the exercise of the conversion option, using the book value method.On January 1, 2016, Knorr Corporation issued $1,400,000 of 7%, 5-year bonds dated January 1, 2016. The bonds pay interest annually on December 31. The bonds were issued to yield 8%. Bond issue costs associated with the bonds totaled $21,540.76. Required: Prepare the journal entries to record the following: January 1, 2016 Sold the bonds at an effective rate of 8% December 31, 2016 First interest payment using the effective interest method December 31, 2016 Amortization of bond issue costs using the straight-line method December 31, 2017 Second interest payment using the effective interest method December 31, 2017 Amortization of bond issue costs using the straight-line methodOn January 1, 2015, when its $30 par value common stock was selling for $80 per share, a corporation issued $10 million of 10% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert it into six shares of the corporation's $30 par value common stock. The debentures were issued for $11 million. At the time of issuance, the present value of the bond payments was $8.5 million, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2016, the corporation's $30 par value common stock was split 3 for 1. On January 1, 2017, when the corporation's $10 par value common stock was selling for $90 per share, holders of 40% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums. Required: 1. Prepare the journal entry to record the original issuance of the convertible debentures. 2. Prepare the journal entry to record the exercise of the conversion option, using the book value method
