On January 1, 2020, Carla Corporation issued a series of 100 convertible bonds, maturing in 5 years. The face amount of each bond was $500. Carla received $51,100 for the bond issue. The bonds paid interest every December 31 at 7%; the market interest rate for bonds with a comparable level of risk was 6.80%. The bonds were convertible to common shares at a rate of 8 common shares per bond. Carla amortized bond premiums and discounts using the effective interest method, and the company s year-end was December 31. On January 1, 2021, 20 of the bonds were converted into common shares. On June 30, 2021, another 20 bonds were converted into common shares. The bondholders chose to forfeit the accrued interest on these bonds. On January 1, 2022, when the fair value of the bonds was $30,570 due to a decrease in market interest rates, a conversion inducement of $28/bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 60 bonds were converted into common shares at this time.
Prepare all required journal entries to record the above transactions. (Hint: don’t forget to accrue interest and amortize the premium on the bond at year-end, if needed).

Answer rating: 100% (QA)

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