Question
Please answer asap if you can. Thank you! On January 1, 2022, Sands Machinery Corporation issued 80 of 12-year, 6% convertible bonds at par. Each
Please answer asap if you can. Thank you!
On January 1, 2022, Sands Machinery Corporation issued 80 of 12-year, 6% convertible bonds at par. Each bond had a par value of 1000 and pays interest annually on December 31. Because the bonds were issued at par, the yield on the bond is also equal to 6%. Each 1000 bond converts into 50 shares of 1 par value common stock at the option of the bondholder beginning 2 years after the date of issue. Bond issue costs are 240 The market price of the common stock on the issue date was equal to 50 per share. Any discount is amortized using the effective interest rate method.
Requirements:
a. | Prepare the journal entry to record the bond issuance. |
b. | Find the effective rate of interest after considering bond issue costs. Prepare the amortization table for the first 3 years using the new effective rate of interest and the effective interest rate method. |
c. | Prepare the journal entries to record the interest payment for the first 3 years. |
d. | Prepare the entry to record the bond conversion assuming that all bonds convert at the end of the third year. |
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