Issuance and Conversion of Bonds entries for Grand
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Issuance and Conversion of Bonds
For each of the unrelated transactions described below, present the entry(ies) required to record each transaction.
1. Grand Corp. issued $20,000,000 par value 10% convertible bonds at 99. If the bonds had not been
convertible, the company's investment banker estimates they would have been sold at 95. Expenses
of issuing the bonds were $70,000.
2. Hoosier Company issued $20,000,000 par value 10% bonds at 98. One detachable stock purchase
warrant was issued with each $100 par value bond. At the time of issuance, the warrants were
selling for $4.
3. Sepracor, Inc. called its convertible debt in 2007. Assume the following related to the transaction:
The 11%, $10,000,000 par value bonds were converted into 1,000,000 shares of $1 par value common
stock on July 1, 2007. On July 1, there was $55,000 of unamortized discount applicable to the
bonds, and the company paid an additional $75,000 to the bondholders to induce conversion of all
the bonds. The company records the conversion using the book value method.
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Solution Summary
Issuance and conversions of bonds entries for grands are examined.
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