Reference no: EM132488622
Point 1: On July 1, 2009, 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 bonds pay interest semi-annually on December 31" and June 30". 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, 2010, the corporation's common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2011, 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.
Required:
Question 1: Prepare in general journal form the entry to record the original issuance of the convertible debentures.
Question 2: Prepare in general journal form the entry to record the interest payment on December 31, 2009.
Question 3: Prepare in general journal form the entry to record the exercise of the conversion option.
Question 4: Prepare in general journal form the entry to record the interest payment on June 30, 201 1.
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