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E16-4B (Conversion of Bonds) On July 1, 2013, when its $1 par value common stock was selling for $66 per share, Indy Hotels Corp. issued $25,000,000 of 6% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond

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E16-4B (Conversion of Bonds) On July 1, 2013, when its $1 par value common stock was selling for $66 per share, Indy Hotels Corp. issued $25,000,000 of 6% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into 10 shares of the corporation?s common stock. The debentures were issued for $26,500,000. The corporation believes the difference between the par value and the amount paid is attributable to the conversion feature. On January 1, 2014, the corporation?s common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2015, when the corporation?s $0.50 par value common stock was selling for $38 per share, holders of 10,000 of the convertible debentures exercised their conversion options.;The corporation uses the straight-line method for amortizing any bond discounts or premiums.;Instructions;(a) Prepare in general journal form the entry to record the original issuance of the convertible debentures.;(b) Prepare in general journal form the entry to record the exercise of the conversion option, using the book value method. Show supporting computations in good form.

 

Paper#78654 | Written in 18-Jul-2015

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