On January 1st, 20X0 Andy W. Li Limited issued $20,000,000 of 10-year 10.0% debenture at 105....

 

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On January 1st, 20X0 Andy W. Li Limited issued $20,000,000 of 10-year 10.0% debenture at 105. Investment bankers believe that the debentures would have sold at 102 without the conversion privilege. Interest is to be paid semi- annually on June 30th and December 31st Each $1,000 debenture can be converted into ten of Andy W. Li Limited's no-par common shares after December 31st, 20X1. On January 1st 20X3 $4,000,000 of the debentures are converted into common shares, which were selling at $88.00. An additional $6,000,000 of the debentures are converted on March 31st, 20X3. The market price of the common shares is then $96.00. Accrued interest at March will be paid when the bond is converted. The bond premium is to be amortized on a straight-line basis, Required: 1. Prepare the journal entries on January 1, 20X0. Date 2. Prepare the journal entries on December 31, 20X1. Date 3. Prepare the journal entries on January 1, 20X3, assuming the cost basis. Date 4. Prepare the journal entries on March 31, 20X3 assuming the cost basis. Date 5. Prepare the journal entries on June 30, 20X3. Date Account Account Account Account Account Debit Debit Debit Debit Debit Credit Credit Credit Credit Credit On January 1st, 20X0 Andy W. Li Limited issued $20,000,000 of 10-year 10.0% debenture at 105. Investment bankers believe that the debentures would have sold at 102 without the conversion privilege. Interest is to be paid semi- annually on June 30th and December 31st Each $1,000 debenture can be converted into ten of Andy W. Li Limited's no-par common shares after December 31st, 20X1. On January 1st 20X3 $4,000,000 of the debentures are converted into common shares, which were selling at $88.00. An additional $6,000,000 of the debentures are converted on March 31st, 20X3. The market price of the common shares is then $96.00. Accrued interest at March will be paid when the bond is converted. The bond premium is to be amortized on a straight-line basis, Required: 1. Prepare the journal entries on January 1, 20X0. Date 2. Prepare the journal entries on December 31, 20X1. Date 3. Prepare the journal entries on January 1, 20X3, assuming the cost basis. Date 4. Prepare the journal entries on March 31, 20X3 assuming the cost basis. Date 5. Prepare the journal entries on June 30, 20X3. Date Account Account Account Account Account Debit Debit Debit Debit Debit Credit Credit Credit Credit Credit

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