Question
Sunland Company issued $6,120,000 of 10%, ten-year convertible bonds on July 1, Year 7 at 96.1 plus accrued interest. The bonds were dated April 1,
Sunland Company issued $6,120,000 of 10%, ten-year convertible bonds on July 1, Year 7 at 96.1 plus accrued interest. The bonds were dated April 1, Year 7 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, Year 8, $1,224,000 of these bonds were converted into 500 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion. If "interest payable" were credited when the bonds were issued, what should be the amount of the debit to "interest expense" on October 1, Year 7? What should be the carrying value of the bonds on April 1, Year 8? Prepare the journal entry for the conversion on Apr. 1, Year 8.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started