On January 1, 2017, Slug Corporation issued $6.4 million of 6%, 10-year convertible bonds at 103. The bonds pay interest on June 30and December 31. Each $1,000 bond is convertible into 30 shares of $1 par common stock. Fuzz Company purchased 30% of the issueas an investment. On July 1, 2021, Fuzz converted all of its bonds into common stock of Slug. The market price per share for Slug was$36 at the time of the conversion. Both companies use the straight-line method for amortization.Required:1. Prepare journal entries for the issuance of the bonds on the issuer and the investor books.2. Prepare the journal entries for the conversion on the books of the issuer and the investor.Complete this question by entering your answers in the tabs below.Required 1Required 2Prepare journal entries for the issuance of the bonds on the issuer and the investor books. (If no entry is required for atransaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)View transaction listJournal entry worksheet12Record the ISSUER-Issuance.Note: Enter debits before credits.TranscationGeneral JournalDebitCredit1

Transaction General Journal Debit Credit 1.a Cash (6400000*103%) $6,592,000…

Answered: On January 1, 2017, Slug Corporation…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter7: Financial Activities

Section: Chapter Questions

Problem 10QE

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Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were issued on May 4. The 7% convertible bonds have a face value of 80,000 and were issued in 2016 at par. Each 1,000 bond is convertible into 25 shares of common stock; to date, none of the bonds have been converted. During 2019, the company earned net income of 79,200 and was subject to an income tax rate of 30%. Required: Compute the 2019 diluted earnings per share.
Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
Frost Company has accumulated the following information relevant to its 2019 earningsper share. 1. Net income for 2019: 150,500. 2. Bonds payable: On January 1, 2019, the company had issued 10%, 200,000 bonds at 110. The premium is being amortized in the amount of 1,000 per year. Each 1,000 bond is currently convertible into 22 shares of common stock. To date, no bonds have been converted. 3. Bonds payable: On December 31, 2017, the company had issued 540,000 of 5.8% bonds at par. Each 1,000 bond is currently convertible into 11.6 shares of common stock. To date, no bonds have been converted. 4. Preferred stock: On July 3, 2018, the company had issued 3,800 shares of 7.5%, 100 par, preferred stock at 108 per share. Each share of preferred stock is currently convertible into 2.45 shares of common stock. To date, no preferred stock has been converted and no additional shares of preferred stock have been issued. The current dividends have been paid. 5. Common stock: At the beginning of 2019, 25,000 shares were outstanding. On August 3, 7,000 additional shares were issued. During September, a 20% stock dividend was declared and issued. On November 30, 2,000 shares were reacquired as treasury stock. 6. Compensatory share options: Options to acquire common stock at a price of 33 per share were outstanding during all of 2019. Currently, 4,000 shares may be acquired. To date, no options have been exercised. The unrecognized compens Frost Company has accumulated the following information relevant to its 2019 earnings ns is 5 per share. 7. Miscellaneous: Stock market prices on common stock averaged 41 per share during 2019, and the 2019 ending stock market price was 40 per share. The corporate income tax rate is 30%. Required: 1. Compute the basic earnings per share. Show supporting calculations. 2. Compute the diluted earnings per share. Show supporting calculations. 3. Indicate which earnings per share figure(s) Frost would report on its 2019 income statement.
Star Co. has bonds with a face value of $200 per share, a term of 3 years, and an interest rate of 8% p.a. paid every May 1 and November 1. Ombre Co. bought 2,500 shares of bonds owned by Star Co. priced at $350 per share on May 1, 2021, excluding brokerage fees of $15 per share. These investments are classified as Trading Securities. On March 1, 2022, Ombre Co. sold 20% of Star Co.'s bonds. priced at $375 per share excluding brokerage fees of $15 per share. On December 1, 2022, 450 of Star Co.'s bonds. sold at a profit of IDR 20 per share. Additional information : Date Announcement of profit (loss) Dividend Payment Fair Value per Sheet 31 Dec 2021 $70,000 $95 per share $375 31 Dec 2022 ($10,000) - $340 Requested: Make the necessary journal entries for Ombre Co. during 2021 and 2022! Solve ASAP in 45 minutes
On January 1, 2021, Madison Products issued $41.2 million of 8%, 10-year convertible bonds at a net price of $42.12 million. Madison recently issued similar, but nonconvertible, bonds at 97 (that is, 97% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Madison's no par common stock. Madison records interest by the straight-line method. On June 1, 2023, Madison notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2023. By June 30, all bondholders had chosen to convert their bonds into shares as of the interest payment date. On June 30, Madison paid the semiannual interest and issued the requisite number of shares for the bonds being converted. Required: 1. & 2. Prepare the journal entries for the issuance of the bonds by Madison and interest payment for June 30, 2021. 3. Prepare the journal entries for the June 30, 2023, interest payment by Madison and the conversion of…
On January 1, 2025, Swifty Company issued 10-year, $1,860,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 16 shares of Swifty common stock. Swifty's net income in 2025 was $412,800, and its tax rate was 20%. The company had 96,000 shares of common stock outstanding throughout 2025. None of the bonds were converted in 2025. a. Compute diluted earnings per share for 2025. (Round answer to 2 decimal places, e.g. 2.55.) Diluted earnings per share $ 3.99 b. Compute diluted earnings per share for 2025, assuming the same facts as above, except that $960,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Swifty common stock. (Round answer to 2 decimal places, e.g. 2.55.) Diluted earnings per share
On January 1, 2021, Starlight Company converted $150,000 bonds into 90,000 shares of $1 par value common stock. The bonds were issued at face value. On the date of the conversion, the stocks had a market price of $6 per share. which one is correct?
On January 1, 2018, Madison Products issued $40 million of 6%, 10-year convertible bonds at a net price of $40.8million. Madison recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). The bondspay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Madison’s no parcommon stock. Madison records interest by the straight-line method.On June 1, 2020, Madison notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2020. By June 30, all bondholders had chosen to convert their bonds into shares as of the interestpayment date. On June 30, Madison paid the semiannual interest and issued the requisite number of shares for thebonds being converted.Required:1. Prepare the journal entry for the issuance of the bonds by Madison.2. Prepare the journal entry for the June 30, 2018, interest payment.3. Prepare the journal entries for the June 30, 2020, interest payment by Madison and the…
On January 1, 2021, Fowl Products issued $89 million of 6%, 10-year convertible bonds at a net price of $91.5 million. Fowl recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Fowl's no par common stock. Fowl records interest by the straight-line method. On June 1, 2023, Fowl notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2023. By June 30 all bondholders had chosen to convert their bonds into shares as of the interest payment date. On June 30, Fowl paid the semiannual interest and issued the requisite number of shares for the bonds being converted. Required: 1. Prepare the journal entry for the issuance of the bonds by Fowl. 2. Prepare the journal entry for the June 30, 2021, interest payment. 3. Prepare the journal entries for the June 30, 2023, interest payment by Fowl and the conversion of the…
On May 1, 2014, Payne Co. issued $900,000 of 7% bonds at 102, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Payne’s common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value of Payne’s common stock was $35 per share and of the warrants was $2. On May 1, 2014, Payne should credit Paid-in Capital from Stock Warrants for $36,560. $36,720. $37,080. $65,000.
On May 1, 2014, Payne Co. issued $900,000 of 7% bonds at 102, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Payne’s common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value of Payne’s common stock was $35 per share and of the warrants was $2. 2. On May 1, 2014, Payne should credit Paid-in Capital from Stock Warrants for a. $36,560. b. $36,720. c. $37,080. d. $65,000. On May 1, 2014, Payne should record the bonds with a a. discount of $36,000. b. premium of $10,080. c. discount of $18,720. d. premium of $27,000. Please follow show work shown in example below On May 1, 2014, Payne Co. issued $900,000 of 7% bonds at 103, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Payne’s common stock, $15 par value, were attached to each $1,000 bond. The bonds without…
Novak Inc. issued $3,840,000 of 11%, 10-year convertible bonds on June 1, 2025, at 99 plus accrued interest. The bonds were dated April 1, 2025, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2026, $1,440,000 of these bonds were converted into 36,000 shares of $18 par value common stock. Accrued interest was paid in cash at the time of conversion. (a) (b) Prepare the entry to record the interest expense at October 1, 2025. Assume that accrued interest payable was credited when the bonds were issued. Prepare the entry to record the conversion on April 1, 2026. (Book value method is used.) Assume that the entry to record amortization of the bond discount and interest payment has been made. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for…

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