can it be answered with an expalnation please?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Ee 480.
Transcribed Image Text:can it be answered with an expalnation please?
On July 1, 2024, when its $1 par value common stock was selling for $66 per share, Teal Corp. issued $24,800,000 of 6% convertible
debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into 10 shares of the
corporation's common stock. The debentures were issued for $26,288,000. The corporation believes the difference between the par
value and the amount paid is attributable to the conversion feature. On January 1, 2025, the corporation's common stock was split 2
for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2026, when the corporation's $0.50 par value
common stock was selling for $38 per share, holders of 9,920 of the convertible debentures exercised their conversion options. The
corporation uses the straight-line method for amortizing any bond discounts or premiums.
(a) Prepare in general journal form the entry to record the original issuance of the convertible debentures. (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. List all debit entries before credit entries.)
Account Titles and Explanation
Cash
Premium on Bonds Payable
Bonds Payable
Account Titles and Explanation
Bonds Payable
Premium on Bonds Payable
Common Stock
Debit
(b) Prepare in general journal form the entry to record the exercise of the conversion option, using the book value method. (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. List all debit entries before credit entries.)
Paid-in Capital in Excess of Par - Common Stock
26288000
Credit
Debit
1488000
24800000
Credit
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