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January 1, 2023 December 31, 2023 January 1, 2024 V Cash Bonds Payable Contributed Surplus - Conversion Rights Interest Expense Bonds Payable Cash Bonds Payable Contributed Surplus Conversion Rights Common Shares O Il

January 1, 2023 December 31, 2023 January 1, 2024 V Cash Bonds Payable Contributed Surplus - Conversion Rights Interest Expense Bonds Payable Cash Bonds Payable Contributed Surplus Conversion Rights Common Shares O Il

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 3C
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January 1, 2023 December 31, 2023 January 1, 2024 June 30, 2024 December 31, 2024 Cash January 1, 2025 Bonds Payable Contributed Surplus Conversion Rights Interest Expense Bonds Payable Cash Bonds Payable Show Transcribed Text Contributed Surplus Conversion Rights Common Shares Bonds Payable Contributed Surplus-Conversion Rights Interest Expense Common Shares Interest Expense Bonds Payable Cash Bonds Payable Loss on Redemption of Bonds I Retained Earnings Contributed Surplus-Conversion Rights Common Shares F Cash
Transcribed Image Text:January 1, 2023 December 31, 2023 January 1, 2024 June 30, 2024 December 31, 2024 Cash January 1, 2025 Bonds Payable Contributed Surplus Conversion Rights Interest Expense Bonds Payable Cash Bonds Payable Show Transcribed Text Contributed Surplus Conversion Rights Common Shares Bonds Payable Contributed Surplus-Conversion Rights Interest Expense Common Shares Interest Expense Bonds Payable Cash Bonds Payable Loss on Redemption of Bonds I Retained Earnings Contributed Surplus-Conversion Rights Common Shares F Cash
On January 1, 2023, Vaughn Corporation, which follows ASPE, issued a series of 505 convertible bonds, maturing in five years. The face amount of each bond was $1,000. Vaughn received $531,500 for the bond issue. The bonds paid interest every December 31 at 5%; the market interest rate for bonds with a comparable level of risk was 6%. The bonds were convertible to common shares at a rate of ten common shares per bond. Vaughn amortized bond premiums and discounts using the effective interest method, and the company's year-end was December 31. On January 1, 2024, 101 of the bonds were converted into common shares. On June 30, 2024, another 101 bonds were converted into common shares. The bondholders chose to forfeit the accrued interest on these bonds. On January 1, 2025, when the fair value of the bonds was $296,500 due to a decrease in market interest rates, a conversion inducement of $20/bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 303 bonds were converted into common shares at that time. a. b. C. d. e. f. Prepare the journal entry at January 1, 2023. Prepare the journal entry at December 31, 2023. Prepare the journal entry at January 1, 2024. Prepare the journal entry at June 30, 2024. Prepare the journal entry at December 31, 2024. Prepare the journal entry at January 1, 2025.
Transcribed Image Text:On January 1, 2023, Vaughn Corporation, which follows ASPE, issued a series of 505 convertible bonds, maturing in five years. The face amount of each bond was $1,000. Vaughn received $531,500 for the bond issue. The bonds paid interest every December 31 at 5%; the market interest rate for bonds with a comparable level of risk was 6%. The bonds were convertible to common shares at a rate of ten common shares per bond. Vaughn amortized bond premiums and discounts using the effective interest method, and the company's year-end was December 31. On January 1, 2024, 101 of the bonds were converted into common shares. On June 30, 2024, another 101 bonds were converted into common shares. The bondholders chose to forfeit the accrued interest on these bonds. On January 1, 2025, when the fair value of the bonds was $296,500 due to a decrease in market interest rates, a conversion inducement of $20/bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 303 bonds were converted into common shares at that time. a. b. C. d. e. f. Prepare the journal entry at January 1, 2023. Prepare the journal entry at December 31, 2023. Prepare the journal entry at January 1, 2024. Prepare the journal entry at June 30, 2024. Prepare the journal entry at December 31, 2024. Prepare the journal entry at January 1, 2025.
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