On January 1, 2018, Super View Video. Incorporated issued $1,550,000 of $1,000 par value, 8%. 6-year bonds.
Question:
On January 1, 2018, Super View Video. Incorporated issued $1,550,000 of $1,000 par value, 8%. 6-year bonds. Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1, 2018. The market rate of interest for similar non-convertible bonds on the date of the bond issue was 10%. The bonds were sold for $1,704,287, yielding an effective rate of 6%. Each bond is convertible into 20 shares of Super View's $1 par value common stock. Assume that there is no beneficial conversion option.
Required
a. Prepare the amortization table for the bond issue assuming that Super View uses the effective interest rate method of amortization.
b. Prepare the journal entry to record the bond issue.
c. Prepare the journal entry to record the first interest payment.
d. The bonds converted on January 1, 2021. Prepare the journal entry to record the bond conversion.
Par ValuePar value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
Step by Step Answer:
a Amortization table Semiannual interest payments 1550000 x 8 2 62000 Period 4 Cash Interest 3 Effec...View the full answer
Intermediate Accounting
ISBN: 978-0134730370
2nd edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
