Exercise 16-4 On January 1, 2016, when its $30 par value common stock was sellin
ID: 2556161 • Letter: E
Question
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Ayayai Corp. issued $11,400,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s common stock. The debentures were issued for $12,312,000. The present value of the bond payments at the time of issuance was $9,690,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.
DeCampus: Home x WileyPLUS ? c? à Secure l https://edugen.wileyplus.com/edugen/lti/main.uni : Apps?MAX.gov! Login D New Tab Patient Portal Kieso, Intermediate Accounting, 16e Help I Assignment Assignment>Open Assignment CALCULATOR PRINTER VERSION BACK NEXT ASSIGNMENT RESOURCES 11 (a) Prepare the entry to record the original issuance of the convertible debentures. (Credit account titles are automatically indented when amount is entered Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit 12312000 a Exercise15-Z Bonds Payable Exercise 15-17 Premium on Bonds Payable 912 (b) Prepare the entry to record the exercise of the conversion option, using the book value method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Exercise 16-18 s Payable 3420000 Premium on Bonds Payable 24624 Stock Paid-in Capital in Excess of Par Common Stock Click if you would like to Show Work forthis question: Open Show Work SHOW LIST OF ACCOUNTS LINK TO TEXT Version 4.24.5.1Explanation / Answer
1. Cash account debit 12,312,000
Bond Payable account credit 11,400,000
Premium Payable on Bind account credit 912,000
(Being record issues of 11,400,000 of 8% convertablc debenture for 12,312,000. The bonds mature in 20 yrs and each 1000 bond is convertible into five shares if 30 par value comon stock)
2. Bond Payable account debit 3,420,000
Premium on Bond Payable account debit 246,240
(Refer working 1)
Common stock account credit $15 par value 513,000
(Refer working 2)
Paid in Capital in excess of par value account credit 3,153,240
( Being record conversion of 30% of outstanding 8% convertible debenture after giving effect to the 2 for 1 split)
Working 1 - Unamortized Premium on Bond Converted
1. Premium on bond payable on Jan 2016 912,000
Amortisation for 2016 (912,000 ÷20) - 45,600
Amortisation for 2017 (912,000 ÷20) - 45,600
Premium on Bond Payable on Jan 2018 820,800
Bond Converted 30%
Unamortized Premium Payable on Bond 246,240
Working 2 - Common stock resulting from conversation
No of shares convertible on Jan 2016 (11400000 / 1000) 11400
No of share for each bond - 11400 x 5 = 57,000
Stock splits on Jan 2017 - 57000 × 2 = 114,000
% of bonds converted - 114,000 x 30% = 34,200
Par value per share 34200 x 15 = 513,000
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