On December 31, 2017, Sierra Corp. issues 4 percent, 10-year convertible bonds with a maturity value of
Question:
On December 31, 2017, Sierra Corp. issues 4 percent, 10-year convertible bonds with a maturity value of $4,500,000. The semi-annual interest dates are June 30 and December 31. The market interest rate is 5 percent, and the issue price of the bonds is 92.2054. Sierra Corp. amortizes bond premium and discount by the effective-interest method.
Required
1. Prepare an effective-interest method amortization table for the first four semi-annual interest periods.
2. Journalize the following transactions:
a. Issuance of the bonds on December 31, 2017. Credit Convertible Bonds Payable.
b. Payment of interest on June 30, 2018.
c. Payment of interest on December 31, 2018.
d. Retirement of the bonds with a maturity value of $200,000 on July 2, 2019. Sierra Corp. purchases the bonds at 96.00 in the open market.
e. Conversion by the bondholders on July 2, 2019, of bonds with a maturity value of $400,000 into 5,000 Sierra Corp. common shares.
3. Prepare the balance sheet presentation of the bonds payable that are outstanding at December 31, 2019.
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Step by Step Answer:
Req 1 SIERRA CORP PARTIAL AMORTIZATION TABLE SEMIANNUAL INTEREST PERIOD A INTEREST PAYMENT 2 OF MATU...View the full answer
Horngrens Accounting
ISBN: 978-0133855388
10th Canadian edition Volume 2
Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo Ann L. Johnston, Peter R. Norwood
