Exercise 16-6 On January 1 2017, Novak Corporation issued $3,740,000 of 10 year,

Question

Exercise 16-6 On January 1 2017, Novak Corporation issued $3,740,000 of 10 year, 8% convertible debentures at 102 Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into 8 shares of Novak Corporation $100 par value common stock after December 31, 2018. On January 1, 2019, $374,000 of debentures are converted into common stock, which is then selling at $111. An additional $374,000 of debentures are converted on March 31, 2019. The market price of the common stock is then $116. Accrued interest at March 31 will be paid on the next interest date Bond premium is amortized on a straight-line basis. Make the necessary journal entries for: (a) December 31, 2018. (c) March 31, 2019 (b) January 1, 2019. (d) June 30, 2019

Explanation / Answer

c.

Working:

a. To record interest payment on 12/31/2018 Date Account Title Debit Credit 12/31/2018 Interest Expense 145860 Premium on Bonds 3740 Cash 149600

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