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P16-2 (Entries for Conversion, Amortization, and Interest of Bonds) Volker Inc. issued $2,500,000 of convertible 10 -year bonds on July 1, 2014. The bonds provide
P16-2 (Entries for Conversion, Amortization, and Interest of Bonds) Volker Inc. issued | ||||||
$2,500,000 | of convertible | 10 | -year bonds on July 1, 2014. The bonds | |||
provide for | 12% | interest payable semiannually on January 1 and July 1. The discount | ||||
in connection with the issue was | $54,000 | , which is being amortized monthly on a | ||||
straight-line basis. | ||||||
The bonds are convertible after one year into | 8 | shares of Volker Inc.'s | $100 | |||
par value common stock for each | $1,000 | of bonds. | ||||
On August 1, 2015, | $250,000 | of bonds were turned in for conversion into common stock. | ||||
Interest has been accrued monthly and paid as due. At the time of conversion any accrued interest on bonds being converted is paid in cash. | ||||||
Note: Due to rounding and significant digits, there may be slight number differences. | ||||||
Instructions: | ||||||
Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates: (Round to the nearest dollar.) | ||||||
(a) August 1, 2015. (Assume the book value method is used.) | ||||||
Aug 1, 15 | Account Title | Amount | ||||
Account Title | Amount | |||||
Account Title | Amount | |||||
Account Title | Amount | |||||
Enter entry memorandum. | ||||||
Area for calculations as desired. | ||||||
Area for calculations as desired. | ||||||
Aug 1, 15 | Account Title | Amount | ||||
Account Title | Amount | |||||
Enter entry memorandum. | ||||||
(b) August 31, 2015. | ||||||
Aug 31, 15 | Account title | Formula | ||||
Account title | Amount | |||||
Enter entry memorandum. | ||||||
Area for calculations as desired. | ||||||
Aug 31, 15 | Account Title | 22,500 | ||||
Account Title | Amount | |||||
Enter entry memorandum. | ||||||
(c) December 31, 2015, including closing entries for end-of-year. | ||||||
Dec 31, 15 | Account Title | Amount | ||||
Account Title | Amount | |||||
Enter entry memorandum. | ||||||
Schedule 1 - Monthly Amortization Schedule | ||||||
Unamortized discount on bonds payable: | ||||||
Amount to be amortized over 120 months | Amount | |||||
Text title | Formula | |||||
Text title | Formula | |||||
Text title | Formula | |||||
Text title | Formula | |||||
Text title | Formula | |||||
Text title | Formula | |||||
Schedule 2 Interest Expense Schedule | ||||||
Amortization of bond discount charged to bond interest expense in 2015 would be as follows: | ||||||
Text title | Formula | |||||
Text title | Formula | |||||
Total | Formula | |||||
Interest on Bonds: | ||||||
Text title | Formula | |||||
Text title | Formula | |||||
Text title | Formula | |||||
Text title | Formula | |||||
Interest for 2015 would be as follows: | ||||||
Text title | Formula | |||||
Text title | Formula | |||||
Total | Formula | |||||
Total interest | ||||||
Text title | Formula | |||||
Text title | Formula | |||||
Text title | Formula | |||||
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