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Prepare journal entry to recognize conversion transaction

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Question - On January 1, 2020, CBT Corp issued 10,000, 20 year, $1,000 bonds. The bonds have an annual coupon of $50, payable on December 31 of each year. Each bond can be convertible in to five common shares. The bonds sold for 120 and it is estimated that the bonds would have sold for 105 if they did not have the convertible option.

Required -

a. Prepare the journal entry to recognize the bond sale made by CBT on January 1, 2020.

b. On January 1, 2023, 2,000 bonds were converted into common shares. Prepare the journal entry to recognize the conversion transaction.

Reference no: EM132910407

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