Exercise 16-1 Your answer is partially correct. Try again For each of the unrela

Question

Exercise 16-1 Your answer is partially correct. Try again For each of the unrelated transactions described below, present the entries required to record each transaction 1. Grand Corp. issued $20,101,000 par value 10% convertible bonds at 97, If the bonds had not been convertible, the company's investment banker estimates they would have been sold at 95. Expenses of issuing the bonds were $78,100 2. Hoosier Company issued $20,101,000 par value 10% bonds at 96, One detachable stock warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $5 3. Suppose Sepracor, Inc. called its convertible debt in 2014, Assume the following related to the transaction: The 11%, $10,124,000 par value bonds were converted into 1,012,400 shares of $1 par value common stock on July 1, 2014. On July 1, there was $59,100 of unamortized discount applicable to the bonds, and the company paid an additional $83,000 to the bondholders to induce conversion of all the bonds. The company records the conversion using the book value method (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit Cash 19497970 Discount on Bonds Payable 603030 Bonds Payable 20101000 (To record bond issue) Unamortized Bond Issue C 78100 Cash 78100 (To record bond issue costs) 2. Cash 19296960 Discount on Bonds Payable 3819190 Paid-in Capital-Stock W 20101000 Bonds Payable 3015150 3.Debt Conversion Expense 83000 Bonds Payable 10124000 Discount on Bonds Pay 59100 Common Stock 1012400 Paid-in Capital in Exces 9052500 Cash 83000

Explanation / Answer

Journal Entries Date Account Title and explanation Debit Credit 2 Cash $         1,92,96,960 Discount on Bonds Payable $            18,09,090           To Paid in Capital - Stock Warrant (201,010 X $ 5) $               10,05,050           To Bonds Payable $           2,01,01,000 Working Notes: Total Par value of the Bonds = $         2,01,01,000 Cash Receieved 96% = $         1,92,96,960 Par Value / $ 100 per bond = Number of Bonds $               2,01,010 Value of the warrant = 201,010 X $ 5 Per Warrant = $            10,05,050 Bonds Payable = Par value of the Bond = $         2,01,01,000 Total $         2,11,06,050 Less: received cash $         1,92,96,960 Difference is discount $            18,09,090

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