XWileyPLUSClass Specifications | Sortedyment OppLEhttps://edugen.wileyplus.com/edugen/student/mainfr.uniDownloadable eTextbookticeGradebookORIONAssignmentmentNEXTBACKPRINTER VERSIONFULL SCREENCALCULATORExercise 16-2Your answer is partially correct. Try again.Sandhill Inc. issued $3,780,000 of 9%, 10-year convertible bonds on June 1, 2017, at 98 plus accrued interest. The bondswere dated April 1, 2017, with interest payable April 1 and October 1. Bond discount is amortized semiannually on astraight-line basis.On April 1, 2018, $1,417,500 of these bonds were converted into 30,000 shares of $19 par value common stock. Accruedinterest was paid in cash at the time of conversion.(a) Prepare the entry to record the interest expense at October 1, 2017. Assume that accrued interest payable wascredited when the bonds were issued.(b) Prepare the entry to record the conversion on April 1, 2018. (Book value method is used.) Assume that the entry torecord amortization of the bond discount and interest payment has been made.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entryis required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimalplaces, e.g. 5,125.)CreditDebitNo. Account Titles and Explanation56,700(a) Interest Payable10:31 PMo search9/22/2019PrintScreenF9E12E10F8F7F6F5F4k&+

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Asked Sep 23, 2019
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X
WileyPLUS
Class Specifications | Sorted
yment Opp
LE
https://edugen.wileyplus.com/edugen/student/mainfr.uni
Downloadable eTextbook
tice
Gradebook
ORION
Assignment
ment
NEXT
BACK
PRINTER VERSION
FULL SCREEN
CALCULATOR
Exercise 16-2
Your answer is partially correct. Try again.
Sandhill Inc. issued $3,780,000 of 9%, 10-year convertible bonds on June 1, 2017, at 98 plus accrued interest. The bonds
were dated April 1, 2017, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a
straight-line basis.
On April 1, 2018, $1,417,500 of these bonds were converted into 30,000 shares of $19 par value common stock. Accrued
interest was paid in cash at the time of conversion.
(a) Prepare the entry to record the interest expense at October 1, 2017. Assume that accrued interest payable was
credited when the bonds were issued.
(b) Prepare the entry to record the conversion on April 1, 2018. (Book value method is used.) Assume that the entry to
record amortization of the bond discount and interest payment has been made.
(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. Round answers to 0 decimal
places, e.g. 5,125.)
Credit
Debit
No. Account Titles and Explanation
56,700
(a) Interest Payable
10:31 PM
o search
9/22/2019
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X WileyPLUS Class Specifications | Sorted yment Opp LE https://edugen.wileyplus.com/edugen/student/mainfr.uni Downloadable eTextbook tice Gradebook ORION Assignment ment NEXT BACK PRINTER VERSION FULL SCREEN CALCULATOR Exercise 16-2 Your answer is partially correct. Try again. Sandhill Inc. issued $3,780,000 of 9%, 10-year convertible bonds on June 1, 2017, at 98 plus accrued interest. The bonds were dated April 1, 2017, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2018, $1,417,500 of these bonds were converted into 30,000 shares of $19 par value common stock. Accrued interest was paid in cash at the time of conversion. (a) Prepare the entry to record the interest expense at October 1, 2017. Assume that accrued interest payable was credited when the bonds were issued. (b) Prepare the entry to record the conversion on April 1, 2018. (Book value method is used.) Assume that the entry to record amortization of the bond discount and interest payment has been made. (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. Round answers to 0 decimal places, e.g. 5,125.) Credit Debit No. Account Titles and Explanation 56,700 (a) Interest Payable 10:31 PM o search 9/22/2019 Print Screen F9 E12 E10 F8 F7 F6 F5 F4 k & +

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Step 1

a. Record the journal entry for interest expense at October 1, 2017 as shown below:

Post
Ref. Debit (S) Credit (S)
Accounts title and explanation
Date
01-Oct-17 Interest payable
$56,700
Interest expense
|[S3,780,000 x 9% x(4-12)+ $2,560]
Discount on bonds payable
Cash [(S3,780,000x9%)+2]
$1,15,960
X
$2,560
$1,70,100
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Post Ref. Debit (S) Credit (S) Accounts title and explanation Date 01-Oct-17 Interest payable $56,700 Interest expense |[S3,780,000 x 9% x(4-12)+ $2,560] Discount on bonds payable Cash [(S3,780,000x9%)+2] $1,15,960 X $2,560 $1,70,100

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Step 2

Working notes:

Compute discount on bonds as shown below
Discount on bonds
Particulars
Par value bonds
Less: Issue price
3,780,000x (98-100)]| |$37,04,400|
Total discount
Amount
S37,80,000
$75,600
Compute discount amortized for the four months from 1t June to 1s Oct as shown below:
Remaining months = 120 months 2 months
= 118 months
Per month amortization of discount = Total discount amortization Remaining months
= $75,600 118
- $640
Discount amortized for 4 months =4 months x $640
$2,560
Note: Intermediate calculations are rounded off to nearest dollars
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Compute discount on bonds as shown below Discount on bonds Particulars Par value bonds Less: Issue price 3,780,000x (98-100)]| |$37,04,400| Total discount Amount S37,80,000 $75,600 Compute discount amortized for the four months from 1t June to 1s Oct as shown below: Remaining months = 120 months 2 months = 118 months Per month amortization of discount = Total discount amortization Remaining months = $75,600 118 - $640 Discount amortized for 4 months =4 months x $640 $2,560 Note: Intermediate calculations are rounded off to nearest dollars

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Step 3

b. Record the journal entry for conversion on Apr...

Post
Ref. Debit ($) Credit (S)
Accounts title and explanation
Date
01-Apr-18 Bonds payable
$14,17,500
Discount on bonds payable
$25,948
Common stock 30,000 x $19)
Paid in capital in excess of par
(S1,417,500 $25,948 - S570,000)
$5,70,000
$8,21,552
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Post Ref. Debit ($) Credit (S) Accounts title and explanation Date 01-Apr-18 Bonds payable $14,17,500 Discount on bonds payable $25,948 Common stock 30,000 x $19) Paid in capital in excess of par (S1,417,500 $25,948 - S570,000) $5,70,000 $8,21,552

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