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 interest payment date. On June 30, Madison paid the semiannual interest and issued the requisite number of shares for the bonds being converted.
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 interest payment date. On June 30, Madison paid the semiannual interest and issued the requisite number of shares for the bonds being converted.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Subject: acounting
Transcribed Image Text:On January 1, 2018, Madison Products issued $50 million of 10%, 20-year convertible bonds at a net price of $50.4 million. Madison
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 Madison's no par common 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 interest payment date. On June 30, Madison paid the
semiannual interest and issued the requisite number of shares for the bonds being converted.
Required:
Assume that Madison Products prepares its financial statements according to International Financial Reporting Standards using the net
method.
1. & 2. Prepare the journal entry for the issuance of the bonds by Madison and interest payment for the June 30, 2018.
3. Prepare the journal entries for the June 30, 2020, interest payment by Madison and the conversion of the bonds (book value
method).
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