Journal Entries (place your answers in the space provided). Note that you may use common abbreviations on your homework and on your exam, like CS for Common Stock and APIC for Additional Paid-in Capital.

A. Convertible Bonds

Like Corporation issued (at a premium of $5,000) a $100,000 bond issue convertible into 2,000 shares of common stock (par value $20). These bonds were converted to common stock on January 2, 2016. At the time of the conversion, the unamortized premium is $2,000, the market value of the bonds is $110,000, and the stock is quoted on the market at $60 per share. to be recorded on the conversion of the bonds? Prepare the journal entry to record the conversion of the bonds to common stock.

B. Convertible Preferred Stock

Love Company issued 1,000 shares of convertible preferred stock, $1,000 par, for 103 (103% of face value) on June 30, 2014. Each preferred share was convertible into 10 shares of common stock (par value of $5). On June 30, 2016, 100 shares of preferred were converted by the investors to 1,000 shares of common stock. The market price of the shares of common at the date of the conversion was $150 per share. Prepare the journal entry to record the conversion of the preferred stock to common stock.

C. Stock Options

On December 30, 2014, Yang Corporation granted compensatory stock options for 5,000 shares of its $1 par value common stock to certain of its key employees. The options may be exercised after 2 years of employment. Market price of the common stock on that date was $30 per share and the option price was $30 per share. Using a fair value option pricing model, total compensation expense is determined to be $80,000. The options are exercisable beginning January 1, 2017, providing those key employees are still in the employ of the company at the time the options are exercised. The options expire on January 1, 2018.

Instructions: Prepare the following selected journal entries for the company on the answer sheet (if no entry required, state no entry).

(1) December 30, 2014.

(2) December 31, 2015.

(3) January 1, 2017, assuming 90% of the options were exercised at that date.

(4) January 1, 2018, for the 10% of the options that expired (see example in text page 894).

D. Restricted Stock

On December 31, 2014, Ying Corporation granted 5,000 shares of its $1 par value common stock to certain of its key employees. The shares are restricted until 2 years of employment is completed (December 31, 2016). Market price of the common stock on that date was $30 per share. Assume that 10% of the employees left the company on January 1, 2016, and that the rest of the employees completed the vesting requirements. Use the Common Stock (Restricted) and the Deferred Compensation accounts as they are illustrated in the class notes.

Instructions:

Prepare the following selected journal entries for the company on the answer sheet (if no entry required, state no entry).

(1) December 31, 2014.

(2) December 31, 2015.

(3) January 1, 2016 for employees that left before vesting (see example in text page 896).

(4) December 31, 2016.