On January 1, 2016, Gless Textiles issued $15 million of 8%, 10-year convertible

Question

On January 1, 2016, Gless Textiles issued $15 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 Gless's no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 10% of the issue as an investment. Required: 1. Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century. (Enter your answers in whole dollars. If no entry is required for a transaction/event, seet "No journal entry required" in the first account field. vie ist view general journal view transaction list Journal Entry Worksheet Record the issuance of the bonds by Gless. Date General Journal Debit Credit January 01, 2016 *Enter debits before credits done clear entry record entry

Explanation / Answer

Issue of bond by Gless

1.    cash Dr. 15150000

To 8%Convertible Bond $15000000

To Premium on Bond Payable $ 150000

(being 8% Convertible bond Issued at premium)

Note: Premium on bond = $101 - $100(Par value)

= $1

Number of Bond Issued = $15000000 / $100

= 150000 Bond

Purchase of Bond Investment by Century

   Bond Investment Dr. $1500000

To Discount On Bond Payable $15000

To cash $1485000

(being Purchase of Bond Investment from Gless)

Note: Par Value of Bond investment = 10% * $15000000

   = $1500000

   Number of Bond Investment = $1500000 / $100

   = 15000

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