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20 April, 00:36

On January 1, 2018, Gless Textiles issued $19 million of 8%, 10-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Glasses no par common stock. Bonds that are similar in all respects, except that they are non convertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 15% of the issue as an investment. Prepare journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century.

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  1. 20 April, 02:43
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    cash 19,190,000

    convertible bonds 19,000,000

    premium on CB 190,000

    convertible bonds 2,850,000

    premium on CB 28,500

    common stock 2,850,000

    additional Paid-in Capital 28,500

    Explanation:

    The bonds are converted to common stock, there is no cash involve in this operation.

    2,850,000 = 19,000,000 x 15%

    28,500 = 190,000 x 15%
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