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On January 1, 2024, Gless Textiles issued $19 million of 8%, 10-year convertible bonds at 101. The bonds pay interest on June 30 and December
On January 1, 2024, Gless Textiles issued $19 million of 8%, 10-year convertible bonds at 101.
- The bonds pay interest on June 30 and December 31.
- Each $1,000 bond is convertible into 40 shares of Glesss no par common stock.
- Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount).
- Century Services purchased 15% of the issue as an investment.
Required:
- Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century.
- Prepare the journal entries for the June 30, 2028, interest payment by both Gless and Century assuming both use the straight-line method.
- On July 1, 2029, when Glesss common stock had a market price of $33 per share, Century converted the bonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (book value method).
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