Exercise 16-6 On January 1, 2017, Skysong Corporation issued $3,800,000 of 10-ye

Question

Exercise 16-6 On January 1, 2017, Skysong Corporation issued $3,800,000 of 10-year, 8% convertible debentures at 104. Interest is to be paid semiannually on June 30 and December 31, Each $1,000 debenture can be converted into 8 shares of Skysong Corporation $100 par value common stock after December 31, 2018 On January 1, 2019, $380,000 of debentures are converted into common stock, which is then selling at $110. An additional $380,000 of debentures are converted on March 31, 2019. The market price of the common stock is then $115. 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. Record the conversions 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 O for the amounts. Round answers to 0 decimal places, e.g. 5,275.) No. Date Account Titles and Explanation Debit Credit (a) Dec. 31, 2018 (b) Jan. 1, 2019

Explanation / Answer

Required journal entries are as prepared below:

Year Particulars L.F Debit ($) Credit ($) 2017 Jan-01 Cash 3,952,000 Unamortized Bond Premium 152,000 Bond payable 3,800,000 (for bond issued for 10 years) Jun-30 Interest expense 144,400 Unamortized Bond Premium (152,000/20) 7,600 Cash (3,800,000*8%*6/12) 152,000 (For interest paid on 8% bonds and amortization of premium) (a) Dec-31 Interest expense 144,400 Unamortized Bond Premium (152,000/20) 7,600 Cash (3,800,000*8%*6/12) 152,000 (For interest paid on 8% bonds and amortization of premium) 2018 Jun-30 Interest expense 144,400 Unamortized Bond Premium (152,000/20) 7,600 Cash (3,800,000*8%*6/12) 152,000 (For interest paid on 8% bonds and amortization of premium) Dec-31 Interest expense 144,400 Unamortized Bond Premium (152,000/20) 7,600 Cash (3,800,000*8%*6/12) 152,000 (For interest paid on 8% bonds and amortization of premium) 2019 (b) Jan-01 Bond Payable 380,000 Unamortized Bond Premium (121,600/3,800,000*380,000) 12,160 Additional paid in capital 63,840 Common Stock (380*8*100) 304000 (c ) Mar-31 Interest expense 64,980 Unamortized Bond Premium (136800/20)*1/2 3,420 Interest payable (3,420,000*8%*3/12) 68,400 (For interest paid on 8% bonds and amortization of premium)

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