Question

Convertible bonds On January 1, Y1, Gless Textiles issued $12 million of 99 , 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 Gless's 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 10% of the issue as an investment. Reynired Prepare the joumal entries for the issuance of the bonds by Gless.

Answer 1

The journal entries for the issuance of the convertible bonds by Gless Textiles are as follows: Debit Cash $12,120,000, Credit Bonds Payable $12,000,000, Credit Premium on Bonds Payable $120,000. Debit Bond Interest Expense $242,400, Credit Cash $242,400 (Interest payment on June 30).

Step-by-step explanation:

The journal entries for the issuance of the bonds by Gless Textiles can be recorded as follows:

1. Debit Cash $12,120,000
   Credit Bonds Payable $12,000,000
   Credit Premium on Bonds Payable $120,000
2. Debit Bond Interest Expense $242,400
   Credit Cash $242,400 (Interest payment on June 30)