Reference no: EM133155790

Question - On March 1, 2021, Bridge of Spies Corporation issued a series of bonds to finance their plans for expansion. The face value of the bonds was $4,000,000, and the bonds were issued at 97. The bonds paid interest annually at a rate of 6% and matured in 10 years. In order to make the bonds more appealing to investors, each $1,000 bond could be converted to 100 shares in Bridge of Spies Corporation. Similar bonds trading on the open market without the convertible option sold at the same price to yield 7%. (BSC follows ASPE)

Required -

1. Prepare the entry on Bridge of Spies Corporation's books to record the issuance of the convertible bonds on March 1, 2021.

2. On March 1, 2023, the Bridge of Spies Corporation offered an incentive of $200,000 in total to the bond holders as an incentive to convert their bonds to common shares. The bonds on that date were trading on the open market for $3,900,000. Assuming that all of the bond holders chose to convert their bonds to common shares, prepare the journal entry on the books of the Bridge of Spies Corporation to record the conversion on March 1, 2023.