Explanation Convertible Bonds: Convertible Bonds are the financial instruments that enable the holder to covert the bonds into a specified number of shares of common stock or preferred shares. Journalizing: Journalizing is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the accounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. Following is the Journal entry recorded for issuance of convertible debt or bond: Date Particulars Post ref. Debit ($) Credit ($) Bonds payable 1,000,000 Additional paid up Capital 160,000 Discount on Bonds Payable 87,000 Common Stock 1,073,000 ( being the adjustment of bonds value on the date of conversion recorded ) Table (1) Bonds payable is a liability for the company, as the company need to pay back them in the future, indicating increase in the liability hence credited with $1,000,000. Paid-up Capital is capital in nature. There is decrease in the paid-up capital indicating decrease in the capital account, hence debited. Discount is an income for the company as the company is providing benefit to the investors...

Intermediate Accounting, Student Value Edition (2nd Edition)

2nd Edition

ISBN: 9780134732145

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Chapter 14, Problem 14.17E

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To prepare: The journal entry to record the adjustment of bonds value on the date of conversion.

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Chapter 14, Problem 14.16E

Chapter 14, Problem 14.18E

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Enumerate the following; 32. Provides for recognition of an equal amount of premium or discount amortization each period. 33. Bonds that mature in one lump sum at a specified future date. 34. Bonds that provide for conversion into some other security at the option of the stockholder. 35. Bonds that mature in a series of installments at future dates. 36. The difference between the face value and the sales price when bonds are sold below their face value. 37. Bonds for which assets are pledged to guarantee repayment. 38. Obligations that are not expected to be paid in cash within one year or the normal operating cycle. 39. Bonds that do not bear interest but instead are sold at significant discounts providing the investor with a total interest payoff at maturity. 40. Costs incurred by the issuer for legal services, printing and engraving, taxes, and underwriting in connection with the sale of a…

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Chapter 14 Solutions

Intermediate Accounting, Student Value Edition (2nd Edition)

Ch. 14 - What conditions or terms does a note payable...Ch. 14 - If the market rate of interest exceeds the face or...Ch. 14 - What is included in bond issue costs and how...Ch. 14 - Prob. 14.4Q Ch. 14 - When a bond is issued at a discount, will its...Ch. 14 - Prob. 14.6Q Ch. 14 - Prob. 14.7Q Ch. 14 - Under IFRS, how do firms account for convertible...Ch. 14 - Prob. 14.9Q Ch. 14 - Can companies reclassify short-term debt expected...

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The journal entry to record the adjustment of bonds value on the date of conversion.

Solution Summary: The author explains the process of journalizing the transactions of an organization in a chronological order.

To prepare: The journal entry to record the adjustment of bonds value on the date of conversion.

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Chapter 14 Solutions