Reference no: EM132865884
Question - On January 1, 2017, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into eight shares of Gottlieb Corporation $100 par value common stock after December 31, 2018. On January 1, 2019, $400,000 of debentures are converted into common stock, which is then selling at $110. An additional $400,000 of debentures are converted on March 31, 2019. The market price of the common stock is then $115. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis.
Instructions - Make the necessary journal entries for:
a. December 31, 2018
b. January 1, 2019
c. March 31, 2019
d. June 30, 2019.
Make the necessary changes to the questions. Use the changes below to answer the questions above.
$6,000,000 4% Bonds issued @104 on 1/1/17.
Interest is paid every six months 6/30 & 12/31.
Premium is amortized on a straight-line basis.
After 2 years from the date of issue, the bonds can be converted into Common Stock as follows: For every $1,000 in bonds, the bond holder can convert the bond into 8 shares of common stock.
On 1/1/19 $600,000 of bonds are converted: $600,000/$1,000 = 600 x 8 = 4,800 shares.
On 3/31/19 an additional $600,000 of bonds are converted: $600,000/$1,000 = 600 x 8 = 4,800 shares.
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