Make journal entry record exercise of conversion option

Assignment Help Accounting Basics
Reference no: EM132516634

Question - On January 1, 2015, when its $30 par value common stock was selling for $80 per share, a corporation issued $10 million of 10% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert it into six shares of the corporation's $30 par value common stock. The debentures were issued for $11 million. At the time of issuance, the present value of the bond payments was $8.5 million, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2016, the corporation's $30 par value common stock was split 3 for 1. On January 1, 2017, when the corporation's $10 par value common stock was selling for $90 per share, holders of 40% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.

Required -

1. Make the journal entry to record the original issuance of the convertible debentures.

2. Make the journal entry to record the exercise of the conversion option, using the book value method.

Reference no: EM132516634

Questions Cloud

Prepare a table that shows computation of cash collections : Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July
What is the cost of materials in work in process at april : Using the FIFO method, what is the cost of materials in work in process at April 30 (round unit calculations to the nearest cent)?
Determine the remeasurement gain or loss : Determine the remeasurement gain or loss to be reported in Stephanie's 2017 consolidated net income, assuming that the U.S. dollar is the functional currency
Explain why the issue hinders organizational efficiency : Identify the company that you want to research for the three written assignments in the course. Explain why the issue hinders organizational efficiency.
Make journal entry record exercise of conversion option : On January 1, 2015, when its $30 par value common stock was selling for $80 per share, make journal entry record exercise of conversion option
What makes inventory planning and control so complex : What are factors which constitute inventory holding cost, order cost are stock-out cost at Manor Bakeries? What makes inventory planning and control so complex
What does vroom model tell us regarding magnitude of goal : What does Vroom's model tell us regarding magnitude of goal, effort, and reward? How do these factors affect an employer's choice on the compensation strategy?
What minimum price would you recommend for acceptance : What minimum price would you recommend for acceptance of the offer to ensure the manufacturer and overall profit of Rs. 1,67,300?
List five types of management accounting information : For K-mart, List five types of management accounting information that might assist K-mart management to make business decisions.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Research state governmental financial accounting issues

You recently landed your dream job working for the state as an accountant. You are given the task to research several state and local governmental financial accounting issues.

  Determine and assuming a tax rate is

This amount included a $50,000 loss on discontinued operation. The amount reported as income from continuing operations, assuming a tax rate of 25%, is

  Prepare sunday starr cash budget for january

All sales are on account. Credit sales for November 2010 are $300,000; Prepare Sunday Starr's cash budget for January and February in columnar format

  What is your capital gains yield on the given stock

You have received a total of $630 in dividends and $14,620 in proceeds from selling the shares. What is your capital gains yield on this stock?

  Prepare the journal entries on first trust books on december

Vargo Corp. owes $308,000 to First Trust. The debt is a 10-year, Prepare the journal entries on First Trust's books on December 31, 2014, 2015, 2016

  Profit generating mechanism on prices

In practice, arbitrage refers to the profit generating mechanism on prices that temporarily deviate from the theoretical or perceived equilibrium relationship

  Determine the inventory turnover ratio

Determine the inventory turnover ratio and average days to sell inventory for the current year and explain the meaning of each number.

  Create development plan to the current organization

Create your own development plan as it applies to the current organization with which you are involved. In your plan, address your plan objectives.

  What is the total ordinary income of the partnership

Dividends from foreign corporations 6,000. Tax-exempt interest income 8,000. What is the total ordinary income of the partnership for 2010

  Problem related to sharing the corporate income

Samantha owned 1,000 shares in Evita, Inc., an S corporation that uses the calendar year. On October 11, 2010 Samantha sells all of her Evita stock. Her basis at the beginning of 2010 was $60,000. Her share of the corporate income for 2010 was $22..

  Dicuss the accounting standards and multinational companies

Dicuss the Accounting Standards and Multinational companies,Management of Translation exchange rate risks by multinational companies

  Journal entries for the following selected transactions

Prepare journal entries for the following selected transactions of Dulcinea Company for 2012.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd