Aubrey Inc. issued $5,345,400 of 9%, 10-year convertible bonds on June 1, 2014.

Question

Aubrey Inc. issued $5,345,400 of 9%, 10-year convertible bonds on June 1, 2014. at 98 plus accrued interest. Hie bonds were dated April 1, 2014, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2015, $2,004,525 of these bonds were converted into 42,100 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion. Prepare the entry to record the interest expense at October 1, 2014. Assume that accrued interest payable was credited when the bonds were issued. Prepare the entry to record the conversion on April 1, 2015. (Book value method is used.) Assume that the entry7 to record amortization of the bond discount and interest payment has been made.

Explanation / Answer

Aubrey Inc. issued $5,345,400 of 9%, 10-year convertible bonds on June 1, 2014.

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