Explore BrainMass
Share

Entries for Conversion, Amortization, and Interest of Bonds

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

P16-2 (Entries for Conversion, Amortization, and Interest of Bonds) Volker Inc. issued
$2,500,000 of convertible 10 -year bonds on July 1, 2012. The bonds
provide for 12% interest payable semiannually on January 1 and July 1. The discount
in connection with the issue was $54,000 , which is being amortized monthly on a
straight-line basis.
The bonds are convertible after one year into 8 shares of Volker Inc.'s $100
par value common stock for each $1,000 of bonds.
On August 1, 2013, $250,000 of bonds were turned in for conversion into common stock.
Interest has been accrued monthly and paid as due. At the time of conversion any accrued interest on bonds being converted is paid in cash.

Note: Due to rounding and significant digits, there may be slight number differences.
Instructions:
Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates: (Round to the nearest dollar.)

(a) August 1, 2013. (Assume the book value method is used.)

Aug 1, 13 Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount

Enter entry memorandum.

Area for calculations as desired.
Area for calculations as desired.

Aug 1, 13 Account Title Amount
Account Title Amount
Enter entry memorandum.

(b) August 31, 2013.

Aug 31, 13 Account title Formula
Account title Amount
Enter entry memorandum.

Area for calculations as desired.

Aug 31, 13 Account Title 22,500
Account Title Amount
Enter entry memorandum.

(c) December 31, 2013, including closing entries for end-of-year.

Dec 31, 13 Account Title Amount
Account Title Amount
Enter entry memorandum.

Schedule 1 - Monthly Amortization Schedule
Unamortized discount on bonds payable:
Amount to be amortized over 120 months Amount
Text title Formula
Text title Formula
Text title Formula
Text title Formula
Text title Formula
Text title Formula

Schedule 2 Interest Expense Schedule
Amortization of bond discount charged to bond interest expense in 2013 would be as follows:
Text title Formula
Text title Formula
Total Formula

Interest on Bonds:
Text title Formula
Text title Formula
Text title Formula
Text title Formula
Interest for 2013 would be as follows:
Text title Formula
Text title Formula
Total Formula

Total interest
Text title Formula
Text title Formula
Text title Formula

© BrainMass Inc. brainmass.com October 25, 2018, 7:46 am ad1c9bdddf
https://brainmass.com/business/journal-entries/entries-conversion-amortization-interest-bonds-514535

Attachments

Solution Summary

Instructional notes and entries attached.

$2.19
See Also This Related BrainMass Solution

Prepare journal entries for Convertible Bonds for von Surf Co

Von Surf Co. issued $1,200,000 of convertible 10 year debentures on July 1, 2012. The debentures provide for 8% interest payable semiannually on January 1 and July 1. The discount in the connection with the issue was $18,000, which is being amortized monthly on a straight-line basis.

The debentures are convertible after one year into nine shares of the Von Surf Co's $1 par value common stock for each $1,000 of debentures.

On August 1, 2013, $200,000 of debentures were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. Accrued interest on debentures is paid in cash upon conversion.

Prepare the journal entries to record the conversion, amortization, and interest in connection with the debentures as of August 1, 2013, August 31, 2013, and December 31, 2013, including closing entries for year-end. Note: On the bond issuance date, it had been at least reasonably possible that the bonds would eventually be converted. (Note: Round to the nearest dollar)

View Full Posting Details