Convertible Bonds Beneficial Conversion Option, Conversion. Use the information from E14- 16 and assume that all bonds convert after three years. The carrying value of the bonds at the conversion date is $ 913,000. Prepare the journal entry at conversion.
In E14-16
Marly, In c., issues 1,000 six- year, 3% convertible bonds at par of $ 1,000. Each $ 1,000 bond converts into 10 shares of no- par value common stock at the option of the bondholder beginning three years after the date of issue. There were no bond issue costs. The market price of the common stock when the bonds are issued is $ 116 per share. Interest is paid annually. Prepare the journal entry to record the issuance of Marly’s convertible debt. What is the effective interest rate on the bonds?