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

1. (Amount in $)

January1, 2016 Dr. Cr.

Record the issuances of bonds by Gless

Bank A/c Dr. (15*101) 1515

To 8% Convertible bonds A/c (15* 100) 1500

To Premium on issue of Bonds A/c (15*1) 15

Record the issuance by Century

Investments in Bonds A/c Dr. ( 15*101*10%) 151.5

To Bank A/c 151.5

2. (Amount in $)

June 30, 2020 Dr. Cr.

Record the Interest payment by Gless

Interest on 8% Bonds A/c Dr. (15*100*8%*1/2) 60

To Bank A/c 60

Profit & Loss A/c Dr. 60

To Interest on 8% Bonds A/c

Record the Interest received by Century

Bank A/c Dr. (15*100*8%*10%*1/2) 6

To interest received on Bonds 6

Interest received on Bonds A/c Dr. 6

To Profit & Loss A/c 6

3. (Amount in $)

July 1, 2021 Dr. Cr.

Record the Conversion of Bond by Gless

8% Convertible bonds A/c Dr. ( 15*100*10%) 150

To Equity Shares Capital A/c 150

No. of Shares issued to Century= 150/1000*100*40 = 600 shares

Record the Conversion of Bond by Century

Investment in Equity Shares of Gless A/c Dr. 150

To Investments in Bonds A/c 150

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