INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 14, Problem 14.14BE
Convertible bonds
• LO14–5
Hoffman Corporation issued $60 million of 5%, 20-year bonds at 102. Each of the 60,000 bonds was convertible into one share of $1 par common stock. Prepare the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Exercise 10.9 (Algo) Accounting for Bonds Issued at a Premium: Issuance, Interest Payments, and
Retirement (LO10-5, LO10-6)
Xonic Corporation issued $8.5 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September
30 of each year, and all of the bonds in the issue mature on March 31, 2041 Xonic's fiscal year ends on December 31. Prepare the
following journal entries.
a. April 1, 2021, to record the issuance of the bonds.
b. September 30, 2021, to pay interest and to amortize the bond premium.
c. March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume
an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31.
d. What is the effect of amortizing the bond premium on (1) annual net income and (2) annual net cash flow from operating activities.
(ignore possible income tax effects.)
(If no entry is required for a transaction/event,…
Q 4 – Majid Corporation issued 5,000, 12%, 5-year, $1,000 bonds dated January 1, 2020,
Instructions
(a). Prepare the journal entry to record the issuance of the bonds at 96.
(b). Prepare the journal entry to record the conversion of the bonds into 100,000 shares
of $10 par value common stock. Assume that bonds were issued at par
Question 7 of 10
Your answer is partially correct.
BDM Corporation issued 1,200, ten year, 7% bonds for 105 on January 1, 2023. Interest is paid annually. Each $500 bond carried a detachable warrant allowing the holder to purchase 210 common shares in BDM at $15 per share, the price at which BDM
shares were trading on the day of the sale of the bonds. Similar straight bonds trading on the open market paid 8%. On June 30, 2023, 180 of the bond holders exercised the options to buy the shares.
Prepare the journal entries to record these events. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places eg. 58,971. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.
Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.)
Date
January 1, 2023
June 30, 2023
V
Account Titles and Explanation
Cash
Bonds…
Chapter 14 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - On January 1, 2018, Brandon Electronics issued 85...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8QCh. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10Q
Ch. 14 - When a notes stated rate of interest is...Ch. 14 - How does an installment note differ from a note...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Air Supply issued 6 million of 9%, 10-year...Ch. 14 - Both convertible bonds and bonds issued with...Ch. 14 - Prob. 14.17QCh. 14 - Cordova Tools has bonds outstanding during a year...Ch. 14 - If a company prepares its financial statements...Ch. 14 - (Based on Appendix 14A) Why will bonds always sell...Ch. 14 - Prob. 14.21QCh. 14 - Prob. 14.22QCh. 14 - Prob. 14.23QCh. 14 - Bank loan; accrued interest LO132 On October 1,...Ch. 14 - Non-interest-bearing note; accrued interest LO132...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Straight-line interest on bonds LO142 On January...Ch. 14 - Investment in bonds LO142 On January 1, a company...Ch. 14 - Note issued for cash; borrower and lender LO143...Ch. 14 - Note with unrealistic interest rate LO143 On...Ch. 14 - Installment note LO143 On January 1, a company...Ch. 14 - Prob. 14.12BECh. 14 - Bonds with detachable warrants LO145 Hoffman...Ch. 14 - Convertible bonds LO145 Hoffman Corporation...Ch. 14 - Reporting bonds at fair value LO146 AI Tool and...Ch. 14 - Bond valuation LO142 Your investment department...Ch. 14 - Determine the price of bonds in various situations...Ch. 14 - Determine the price of bonds; issuance; effective...Ch. 14 - Investor; effective interest LO142 (Note: This is...Ch. 14 - Bonds; issuance; effective interest; financial...Ch. 14 - Bonds; issuance; effective interest LO142 The...Ch. 14 - Prob. 14.7ECh. 14 - Investor; straight-line method LO142 (Note: This...Ch. 14 - Issuance of bonds; effective interest;...Ch. 14 - Issuance of bonds; effective interest;...Ch. 14 - Bonds; effective interest; adjusting entry LO142...Ch. 14 - Prob. 14.12ECh. 14 - Issuance of bonds; effective interest LO142...Ch. 14 - Prob. 14.14ECh. 14 - Error correction; accrued interest on bonds LO142...Ch. 14 - Error in amortization schedule LO143 Wilkins Food...Ch. 14 - Prob. 14.17ECh. 14 - Note with unrealistic interest rate; lender;...Ch. 14 - Prob. 14.19ECh. 14 - Prob. 14.20ECh. 14 - Installment note LO143 LCD Industries purchased a...Ch. 14 - Prob. 14.22ECh. 14 - Early extinguishment LO145 The balance sheet of...Ch. 14 - Convertible bonds LO145 On January 1, 2018, Gless...Ch. 14 - Prob. 14.25ECh. 14 - Convertible bonds; induced conversion LO145 On...Ch. 14 - Prob. 14.27ECh. 14 - Bonds with detachable warrants LO145 On August 1,...Ch. 14 - Reporting bonds at fair value LO146 (Note: This...Ch. 14 - Reporting bonds at fair value LO146 On January 1,...Ch. 14 - Reporting bonds at fair value; calculate fair...Ch. 14 - Prob. 14.32ECh. 14 - Troubled debt restructuring; debt settled ...Ch. 14 - Prob. 14.34ECh. 14 - Troubled debt restructuring; modification of...Ch. 14 - Prob. 14.36ECh. 14 - Determining the price of bonds; discount and...Ch. 14 - Effective interest; financial statement effects ...Ch. 14 - Prob. 14.3PCh. 14 - Bond amortization schedule LO142 On January 1,...Ch. 14 - Issuer and investor; effective interest;...Ch. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Bonds; effective interest; partial period...Ch. 14 - Zero-co upon bonds LO142 On January 1, 2018,...Ch. 14 - Prob. 14.10PCh. 14 - Prob. 14.11PCh. 14 - Prob. 14.12PCh. 14 - Note and installment note with unrealistic...Ch. 14 - Prob. 14.14PCh. 14 - Early extinguishment; effective interest LO145...Ch. 14 - Prob. 14.16PCh. 14 - Prob. 14.17PCh. 14 - Early extinguishment LO145 The long-term...Ch. 14 - Convertible bonds; induced conversion; bonds with...Ch. 14 - Convertible bonds; zero coupon; potentially...Ch. 14 - Prob. 14.21PCh. 14 - Determine bond price; record interest; report...Ch. 14 - Report bonds at fair value; quarterly reporting ...Ch. 14 - Prob. 14.24PCh. 14 - Prob. 14.25PCh. 14 - Troubled debt restructuring Appendix B At January...Ch. 14 - Prob. 14.1BYPCh. 14 - Real World Case 142 Zero-coupon debt; HP Inc. ...Ch. 14 - Prob. 14.4BYPCh. 14 - Prob. 14.5BYPCh. 14 - Prob. 14.6BYPCh. 14 - Prob. 14.8BYPCh. 14 - Prob. 14.9BYPCh. 14 - Research Case 1410 FASB codification research;...Ch. 14 - Prob. 14.11BYP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- QUESTION 9 Bonds Payable has a balance of $1,000,000, and Discount on Bonds Payable has a balance of $15,500. If the issuing corporation redeems the bonds at 98.5, what is the amount of gain or loss on redemption?arrow_forwardQuestion 9 Vadercat Limited issued $15 million 4.0 percent, 8 year bonds on September 1, 2023. The market rate of interest on the date of the issue was 4.5 percent. Interest is payable semi-annually on March 1 and September 1. The company's year-end is December 31. Required: a. Prepare all journal entries required to record the bonds in the company's financial records for the first full year the bonds are outstanding. The company uses the straight-line method of amortizations. b. Indicate how the bond obligation would be shown on the company's year-end statement of financial position. c. How much interest expense, related to this security, is shown on the 2023 year end income statement? d. How much interest expense, related to this security, will be shown on the 2024 year end income statement?arrow_forward16 AA .BLANKSHEET .BLANKSHEET .BLANKSHEET .BLANKSHEET < 10:55 v2.cengagenow.com 56 ال.. Interest for bond (held-to-maturity) investments On February 1, Hansen Company purchased $120,000 of 5%, 20-year Knight Company bonds at their face amount plus 1 month's accrued interest. The bonds pay interest on January 1 and July 1. On October 1, Hansen Company sold $40,000 of the Knight Company bonds acquired on February 1, plus 3 months' accrued interest. On December 31, 3 months' interest was accrued for the remaining bonds. Determine the interest earned by Hansen Company on Knight Company bonds for the year. Marrow_forward
- Problem 5 On January 1, 2022, Luffy Company issued 500 of its 5-year, 10% P1,000 face value bonds at 112. Each bond includes a warrant that allows the holder to purchase 20 ordinary shares with par value P100 at P110 per share. The market value of the bond ex-warrant at the time of issuance is 98. The amount assigned to the share warrants outstanding upon issuance is P70,000. Required: (assume the following independent cases): 12. If 60% of the warrants were exercised and the rest were expired, compute for the amount to be credited to Share premium immediately after the exercise of the said warrants. 13. If all warrants were exercise, compute for the amount to be credited to Share premium immediately after the exercise of the said warrants. Can you show the solutions? The answers are: 12. 102,000 13. 170,000arrow_forward17 The company has outstanding bonds payable with a total face value of $100,000. On July 1, the company redeemed the bonds by purchasing them on the open market for a total of $102,700. Which ONE of the following would be reported at the time of the redemption of the bonds assuming that the bonds have an unamortized premium of $2,000? O Loss on Bond Redemption of $4,700 O Gain on Bond Redemption of $2,700 O Loss on Bond Redemption of $700 O Gain on Bond Redemption of $700 O Gain on Bond Redemption of $2,000 O Gain on Bond Redemption of $4,700 O Loss on Bond Redemption of $2,700 O Loss on Bond Redemption of $2,000arrow_forwardMa3. 24 y Company issued $100,000, 6% bonds on January 1, Year 1 at 103. Each $1,000 bond included 20 detachable stock warrants. Each warrant allowed the holder to purchase one share of y Company’s $1 par value common stock for $20 per share. On the date of issue, each warrant had a fair value of $5 per warrant. The entry to record the issue of the bonds would include A debit to discount on bonds payable for $7,000 A debit to cash for $143,000 A credit to paid-in capital, stock warrants for $40,000 A credit to premium on bonds payable for $3,000arrow_forward
- Q 11 On January 1, 20x8, James Corporation issued $500,000, 10%, 5-year bonds, at 98. The bonds pay semiannual interest on January 1 and July 1. The company uses the straight-line method of amortization and has a calendar year end. The journal entry on July 1, 20x8 would include which of the following? Select one: a. Debit to Bond Interest Expense for $26,000 b. Debit to Bond Interest Expense for $25,000 c. Credit to cash for $26,000 d. None of the abovearrow_forwardP 16 On 1/10/2019 ABC company issued a $120,000, 12%, 4 years bonds. The bonds pay interest quarterly on 1/1 , 1/4,1/7 , and 1/10. The bonds were issued for 136,293.25, since the market rate was equal 8%. On 1/5 / 2021 the company called 75% of its outstanding at 102² Required: Based on the above given information, answer the following question: (a) What is the amount of interest expense that must be presented on ABC" Company income statement for the year ended December, 31, 2019? (b) What is the bond's carrying value that must be presented on the statement of financial position as on December, 31, 2020? (c) Prepare ALL the required journal entries for the year 2021.arrow_forwarduestion 3 B. Corporation issued $10 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2041. B. Corp.'s fiscal year ends on December 31. Prepare the following journal entries. a- April 1, 2021, to record the issuance of the bonds. b-September 30, 2021, to pay interest and to amortize the bond premium. c- March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).arrow_forward
- MGMT FFAC Ch 10: Exercises Part A: Entity J issued $400,000, 10%, 10-year bonds on January 1, 2024, at par. Interest is payable annually on December 31. Instructions Prepare all journal entries made in 2024 related to the bond issue and a partial balance sheet showing the bonds at December 31.arrow_forwardLO 13.3 Pinetop Corporation issued $150,000 10-year bonds at par. The bonds have a stated rate of 6% and pay interest annually. What is the journal entry to record the sale of the bonds?arrow_forwardExercise 12-2 (Algo) Securities held-to-maturity; bond investment; effective interest, premium [LO12-1] Mills Corporation acquired as a long-term investment $280 million of 6% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield was 4% for bonds of similar risk and maturity. Mills paid $330.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $320.0 million. Required: 1.8 2. Prepare the journal entry to record Mills' investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate. 3. At what amount will Mills report its investment in the December 31, 2021, balance sheet? 4. Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Financial Accounting - Long-term Liabilities - Bonds; Author: Finance & Accounting Videos by Prof Coram;https://www.youtube.com/watch?v=_1fwsJIGMos;License: Standard Youtube License