9. On January 1, 2015, Slug Corporation issued $0.3 mln of 10%, 10-year converti

Question

9. On January 1, 2015, Slug Corporation issued $0.3 mln of 10%, 10-year convertible bonds at 102, The bonds pary intorest on June 30 and December 31. Each $1,000 bond is convertible into 50 shares of $1 par common stock. Fuzz Company purchased 30% of the issue s an investment. On July 1, 2019, Fuzz converted all of its bonds into common stock of lug. The market price per share for Slug was $35 at the tme of the conversion. Both companies use the straight-ine method for amortization. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Enter your answers in whole dollars.) 1. Prepare journal entries for the issuan of the bonds on the issuer and the investor books, View transaction list Journal entry worksheet Record the ISSUER-Issuance Note: Enter debits before credits. General Journal Debit Credit Record entry Clear entry View general journal 2. Prepare the journal entries for the conversion on the books of the issuer and the investor MacBook Air esc F2 F4 FS F6 F7

Explanation / Answer

(1) ISSUER-Issuance Cash (102% x $6,300,000) 6,426,000 Convertible bonds payable 6,300,000 Premium on bonds payable 126,000 INVESTOR-Purchased 30% of the issue Investment in convertible bonds 1,890,000 Premium on bond investment 37,800 Cash 1,927,800 (2) ISSUER-Conversion 9 semiannual periods later Convertible bonds payable 1,890,000 Premium on bonds payable ($37,800 - ($37,800/20) x 9) 20,790 Common stock [(1,890 x 50) x $1] 94,500 Paid-in capital in excess of par (balance) 1,816,290 INVESTOR- Conversion 9 semiannual periods later Investment in common stock 1,910,790 Investment in convertible bonds 1,890,000 Premium on bond investment 20,790

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