E16-2 Aubrey Inc. issued
$4,000,000 of 10%, 10-year convertible bonds on June 1, 2014,
at 98 plus accrued interest. The bonds were dated April 1, 2014, with
interest payable April 1 and October 1. Bond discount is amortized semiannually
on a straight-line basis.
On April 1, 2015, $1,500,000 of these bonds were converted into 30,000 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion.
(a) Prepare the entry to record
the interest expense at October 1, 2014. Assume that accrued interest payable
was credited when the bonds were issued.
(b) Prepare the entry to record
the conversion on April 1, 2015. (Book value method is used.) Assume that the
entry to record amortization of the bond discount and interest payment has been
made.
(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
0 for the amounts. Round answers to 0 decimal places, e.g. $3,500.)
No. Account Titles and
Explanation Debit Credit
TUTORIAL PREVIEW
No.
|
Account Titles and Explanation
|
Debit
|
Credit
|
(a)
|
Interest Payable ($200,000 X 2/6)
|
66,667
| |
Interest Expense ($200,000 X 4/6) + $2,712
|
136,045
|
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