1 answer

($ in millions) $198 Long-Term Liabilities 9.6% convertible bonds, callable at 101 beginning in 2022, due...

Question:

($ in millions) $198 Long-Term Liabilities 9.6% convertible bonds, callable at 101 beginning in 2022, due 2025 (net of unamor

Required: 1. Prepare the journal entries that were recorded when each of the two bond issues was originally sold in 2008 and

3. Assume Bradley-Link induced conversion by offering $150 cash for each bond converted. Prepare the journal entry to record

($ in millions) $198 Long-Term Liabilities 9.6% convertible bonds, callable at 101 beginning in 2022, due 2025 (net of unamortized discount of $2) [note 8] 10.4% registered bonds callable at 104 beginning in 2031, due 2035 (net of unamortized discount of $1) [note 8] Shareholders' Equity Equity-stock warrants Note 8: Bonds (in part) The 9.6% bonds were issued in 2008 at 97.5 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of the Company's no par common stock. The 10.4% bonds were issued in 2012 at 102 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond was issued with 40 detachable stock warrants, each of which entitles the holder to purchase one share of the Company's no par common stock for $25, beginning 2022. On January 3, 2022, when Bradley-Link's common stock had a market price of $32 per share, Bradley-Link called the convertible bonds to force conversion. 90% were converted; the remainder were acquired at the call price. When the common stock price reached an all-time high of $37 in December of 2022, 40% of the warrants were exercised.
Required: 1. Prepare the journal entries that were recorded when each of the two bond issues was originally sold in 2008 and 2012. a. Record the bond issue that was originally sold in 2008. b. Record the bond issue that was originally sold in 2012. 2. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2022 and the retirement of the remainder. a. Record the conversion of 90% of the convertible bonds. b. Record the retirement of the remainder bonds.
3. Assume Bradley-Link induced conversion by offering $150 cash for each bond converted. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2022. a. Record the conversion of 90% of the convertible bonds. 4. Assume Bradley-Link induced conversion by modifying the conversion ratio to exchange 45 shares for each bond rather than the 40 shares provided in the contract. Prepare the journal entry to record (book value method) the conversion of 90% of the convertible bonds in January 2022. a. Record the conversion of 90% of the convertible bonds. 5. Prepare the journal entry to record the exercise of the warrants in December 2022. ABC a. Record the exercise of the warrants.

Answers

Requirement 1:

a. Journal entry for the bonds issued in 2008

Date Account Title and Explanation

Debit

(in million)

Credit

(in million)

2008    Cash ($200 million × 97.5%) $195.0
Discount on Bonds Payable ($200 million − $195 million) $5.0
                       9.6% Convertible Bonds Payable ($198 million + $2 million) $200.0
To record 9.6% convertible bonds issued

b. Journal entry for the bonds issued in 2012

2012    Cash ($50 million × 102%) $51.0
Discount on Bonds Payable ($50 million + 4 million − $51 million) $3.0
                       10.4% Convertible Bonds Payable ($49 million + $1 million) $50.0
                        Equity Stock Warrants $4.0
To record 10.4% bonds with warrants issued

Requirement 2:

a. Record the following journal entry for the conversion of 90% of convertible bonds

January 9.6% Convertible Bonds Payable ($200 million × 90%) $180.0
2022                     Discount on Bonds Payable ($2 million × 90%) $1.8
                    Common Stock ($180 million − $1.8 million) $178.2
To record conversion of 90% of 9.6% convertible bonds

b. Record the following journal entry for the retirement of remainder bonds

January 9.6% Convertible Bonds Payable ($200 million × 10%) $20.0
2022    Loss on Early Retirement of Bonds Payable ($20.20 + $0.20 − $20) $0.4
                    Discount on Bonds Payable ($2 million × 10%) $0.2
                    Cash (200 million − $180 million) × 101% $20.2
To record early retirement of remainder bonds

Requirement 3: Record the following journal entry for the conversion of 90% of the convertible bonds

January 9.6% Convertible Bonds Payable ($200 million × 90%) $180.0
2022 Conversion Expense (200,000 bonds × $150 × 90%) $27.0
                    Discount on Bonds Payable ($2 million × 90%) $1.8
                    Common Stock ($180 + $27 − $1.8 − $27) $178.2
                    Cash (200,000 bonds × $150 × 90%) $27.0
To record conversion of 9.6% convertible bonds

Requirement 4: Record the following journal entry for the conversion of 90% of the convertible bonds

January 9.6% Convertible Bonds Payable ($200 million × 90%) $180.0
2022 Conversion Expense (200,000 bonds × (45− 40) shares × $32 × 90%) $28.8
                    Discount on Bonds Payable ($2 million × 90%) $1.8
                    Common Stock ($180 + $28.8 − $1.8) $207.0
To record conversion 9.6% convertible bonds

Requirement 5: Record the following journal entry for the exercise of warrants

December    Cash (50,000 bonds × 40 warrants per bond × 40% × $25) $20.0
2022 Equity Stock Warrants ($4 million × 40%) $1.6
                    Common Stock $21.6
To record equity stock warrants exercised
.

Similar Solved Questions

1 answer
How do you solve #8| x | + 19= 11#?
How do you solve #8| x | + 19= 11#?...
1 answer
PLEASE ANSWER QUICKLY Question 2 Determine the coordinatess, y, z of the centroid of volume of...
PLEASE ANSWER QUICKLY Question 2 Determine the coordinatess, y, z of the centroid of volume of this composite machine element Volume of sphere is ar 1685 mm mm 96 mm vo 0 m...
1 answer
The Bank of Humber is interested in finding a good technique of forecasting short term changes...
The Bank of Humber is interested in finding a good technique of forecasting short term changes in branch demands to better plan their staffing allocation. To accomplish this objective, the bank has been reviewing information on the number of customers doing business at the Rexdale branch on a daily ...
1 answer
Ryan is self-employed. This year Ryan used his personal auto for several long business trips. Ryan...
Ryan is self-employed. This year Ryan used his personal auto for several long business trips. Ryan paid $1,590 for gasoline on these trips. His depreciation on the car if he was using it fully for business purposes would be $4,800. During the year, he drove his car a total of 18,800 miles (a combina...
1 answer
Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been...
Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant growth rate that he should use while valuing Pan Asia Mining Co. Robert has the following information ava...
1 answer
Aeropendulum, derive differential equation
Derive anequation of motion (ordinary differential equation) which describes the motion of thependulum (angle theta(t)) as a function of the propeller thrust force T(t). Assume that thepropeller thrust force is proportional to the applied voltage T(t) = K*u(t) and substitute this function inyour mod...
1 answer
State the null and alternative hypotheses that should be used to test the effectiveness of the...
Jan Lindhe conducted a study on the effect of an oral antiplaque rinse on plaque buildup on teeth. Fourteen subjects, whose teeth were thoroughly cleaned andpolished, were randomly assigned to two groups of seven subjects each. Both groups were assigned to use oral rinses(no brushing) for a 2-week p...
1 answer
In an old-style television set, electrons are shot from the hack end of the TV to...
In an old-style television set, electrons are shot from the hack end of the TV to the front under the influence of an electric field approximately 25,000 N/C (the electrons hit the back of the TV screen to make light). Suppose the electric field points from right to left and the distance to the scre...
1 answer
Consider the graph of y m e. 8. (a) Find the equation of the graph that results from reflecting about the line y (b...
Consider the graph of y m e. 8. (a) Find the equation of the graph that results from reflecting about the line y (b) Find the equation of the graph that results from reflecting about the line x -3. Question from 1.6: Inverse Functions and Logarithms A function is given by a verbal description. Deter...
1 answer
The following table contains Asbury Inc.'s adjusted trial balance: Cash Supplies Prepaid rent Salaries expense Equipment...
The following table contains Asbury Inc.'s adjusted trial balance: Cash Supplies Prepaid rent Salaries expense Equipment Service revenue Rent expense Dividends Merchandise revenue Accounts payable Common stock Retained earnings $12,000 $4,500 $2,000 $4,500 $65,000 $18,000 $20,000 $3,000 $12,000 ...
1 answer
Draw 1-dodecanoic, 2-cis,cis-8,12-octadecenoic phosphotidic-glycerol at a pH of 7.0.
Draw 1-dodecanoic, 2-cis,cis-8,12-octadecenoic phosphotidic-glycerol at a pH of 7.0....
1 answer
Let X ¯ ^ be the mean of a random sample of size 50 drawn from...
Let X ¯ ^ be the mean of a random sample of size 50 drawn from a population with mean 112 and standard deviation 40. Determine the expected value of the sample mean, E { X ¯ ^ } ., the standard deviation of the sample mean, the probability that the sample mean assumes a value greater than ...
1 answer
Can i get help on #4 please vesicles is exceedingly brief (-1ms). 4. Be able to...
can i get help on #4 please vesicles is exceedingly brief (-1ms). 4. Be able to describe the roles of clathrin and dynamin, two proteins required for endocytosis of synaptic vesicles....
1 answer
Part B Provide the products for the following reactions. heat CO2CH3 С heat С CO2CH3 heat...
Part B Provide the products for the following reactions. heat CO2CH3 С heat С CO2CH3 heat CN...
1 answer
Problem 4: Given L(s) = K(8 + 1) s(s+3) (a) Use method 2 to sketch the...
Problem 4: Given L(s) = K(8 + 1) s(s+3) (a) Use method 2 to sketch the Nyquist plot of L(s). Do not include the pole at s = 0 in the RHP contour (i.e. assume P = O unstable open-loop poles). Note: The Bode phase function is not monotonic, but you may still use method 2. (b) Using the Nyquist stabili...