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Question - Conversion of Bonds

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Question - Conversion of Bonds

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.

Record the conversions using the book value method.

Reference no: EM132454241

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