On January 1, 2023, when the fair value of its common shares was $80 per share, Blossom Corp. issued $9 million of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into 5 common shares. The debentures were issued for $9.5 million. The bond payment's present value at the time of issuance was $7.5 million and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2024, the corporation's common shares were split 3 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2025, when the fair value of the corporation's common shares was $120 per share, holders of 20% of the convertible debentures exercised their conversion option. Blossom applies ASPE and uses the straight-line method for amortizing any bond discounts or premiums. Show Transcribed Text Using the book value method, prepare the entry to record the exercise of the conversion option. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.)
On January 1, 2023, when the fair value of its common shares was $80 per share, Blossom Corp. issued $9 million of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into 5 common shares. The debentures were issued for $9.5 million. The bond payment's present value at the time of issuance was $7.5 million and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2024, the corporation's common shares were split 3 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2025, when the fair value of the corporation's common shares was $120 per share, holders of 20% of the convertible debentures exercised their conversion option. Blossom applies ASPE and uses the straight-line method for amortizing any bond discounts or premiums. Show Transcribed Text Using the book value method, prepare the entry to record the exercise of the conversion option. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.)
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 3C
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Munabhai
Transcribed Image Text:On January 1, 2023, when the fair value of its common shares was $80 per share, Blossom Corp. issued $9 million of 8%
convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the
bond into 5 common shares. The debentures were issued for $9.5 million. The bond payment's present value at the time of
issuance was $7.5 million and the corporation believes the difference between the present value and the amount paid is
attributable to the conversion feature. On January 1, 2024, the corporation's common shares were split 3 for 1, and the
conversion rate for the bonds was adjusted accordingly. On January 1, 2025, when the fair value of the corporation's
common shares was $120 per share, holders of 20% of the convertible debentures exercised their conversion option.
Blossom applies ASPE and uses the straight-line method for amortizing any bond discounts or premiums.
Show Transcribed Text
Using the book value method, prepare the entry to record the exercise of the conversion option. (Credit account titles
are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for
the account titles and enter O for the amounts. List all debit entries before credit entries.)
Account Titles and Explanation
Bonds Payable
Contributed Surplus - Conversion Rights
G
Common Shares
Debit
4230000
400,000
Credit
3,130,000
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