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(b) Bonds Payable Discount on Bonds Payable Common Stock Paid-in Capital in Excess of Par-Common Stock eTextbook and Media 8050000 176965 56000 7817035

(b) Bonds Payable Discount on Bonds Payable Common Stock Paid-in Capital in Excess of Par-Common Stock eTextbook and Media 8050000 176965 56000 7817035

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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(b) Bonds Payable Discount on Bonds Payable Common Stock Paid-in Capital in Excess of Par-Common Stock eTextbook and Media 8050000 176965 56000 7817035
Transcribed Image Text:(b) Bonds Payable Discount on Bonds Payable Common Stock Paid-in Capital in Excess of Par-Common Stock eTextbook and Media 8050000 176965 56000 7817035
Pearl Inc. issued $16,100,000 of 12%, 40-year convertible bonds on November 1, 2025, at 97 plus accrued interest. The bonds were dated July 1, 2025, with interest payable January 1 and July 1. Bond discount (premium) is amortized semiannually on a straight-line basis. On July 1, 2026, one-half of these bonds were converted into 56,000 shares of $1 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 December 31, 2025. Assume that accrued interest payable was credited when the bonds were issued. Credit Interest Payable for the full amount due: debit Interest Payable for the amount recognized at insurance. (Round to nearest dollar) Prepare the entry to record the conversion on July 1, 2026. (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 O for the amounts. Round answers to O decimal place, e.g. 5,125. List all debit entries before credit entries) No. Account Titles and Explanation (a) Interest Payable Interest Expense Debit 644000 324000 Credit
Transcribed Image Text:Pearl Inc. issued $16,100,000 of 12%, 40-year convertible bonds on November 1, 2025, at 97 plus accrued interest. The bonds were dated July 1, 2025, with interest payable January 1 and July 1. Bond discount (premium) is amortized semiannually on a straight-line basis. On July 1, 2026, one-half of these bonds were converted into 56,000 shares of $1 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 December 31, 2025. Assume that accrued interest payable was credited when the bonds were issued. Credit Interest Payable for the full amount due: debit Interest Payable for the amount recognized at insurance. (Round to nearest dollar) Prepare the entry to record the conversion on July 1, 2026. (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 O for the amounts. Round answers to O decimal place, e.g. 5,125. List all debit entries before credit entries) No. Account Titles and Explanation (a) Interest Payable Interest Expense Debit 644000 324000 Credit
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