15.1k views
1 vote
Petrenko Corporation has outstanding 2,000 $1,000 bonds, each convertible into 50 shares of $10 par value common stock. The bonds are converted on December 31, 2017, when the unamortized discount is $30,000 and the market price of the stock is $21 per share. Record the conversion using the book value approach. Eisler Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $40. Use the proportional method to record the issuance of the bonds and warrants.

1 Answer

3 votes

Solution:

The following journal entries will be passed:

Accounts Debit Credit

Bond Payable (2000 bonds x $1000) $2,000,000

Discounts on Bonds Payable $30,000

Common Stock (50 shares x $10 x 2000 bonds) $1,000,000

Paid -in Capital in Excess of Par--Common Stock $970,000

(TO RECORD CONVERSION)

Cash ( 2000 * $1000 * 1.01) $2020000

Discount on bonds payable $59216

Bonds payable (2000 * $1000) $ 2000000

Paid - in - Capital - Stock warrant $79216

(To record issuance of bonds with stock warrant)

User Unflores
by
7.2k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.