UVW Corporation issued $500,000 of 10-year, 6% convertible bonds on January 1, 2024, at 105. Each $1,000 bond is convertible into 50 shares of common stock. The market rate of interest for similar non-convertible bonds is 7%.
- Calculate the proceeds from the bond issuance and prepare the journal entry for the issuance. If the bonds are converted into common stock on January 1, 2026, prepare the journal entry for the conversion. Discuss the impact of the conversion on UVW Corporation’s financial statements and shareholders’ equity.