Question Two $(40\%)($All calculations must be shown$)$

On January $1^{st},2021,$ Phelps Corporation has been authorized to issue $100,000$ ordinary shares of $$25$ par value and $10,000,$$$50$ par value, $5\%$ convertible cumulative preference shares. By December ${31}^{st},2021,$ it has a retained earnings balance of $$200,000.$

During $2021,$ Phelps completed the following transactions:

Jan $1^{st},$ Phelps issued $20,000$ ordinary shares at $$50$ per share for cash

$2010050=1m,20k25=500k$

Feb $2^{nd},$ Phelps issued $1,000$ convertible preference shares at $$250$ per share for cash

$1,00-250=250,000$

$110\mathrm{.}05==50k$

$25=25k$

Mar $4^{th},$ Phelps issued $5,000$ ordinary shares for Land. The land was appraised at $$300,000,$ while the fair market value of the land is $$225,000.$

Lend $3$ ool

Scso

spod

$225$

$75\%$

$4.$ April $1^{st}$ Phelps issued $$4,000,000$ par value, $7\%$ convertible bonds which were sold

$BP$ at $$3,920,000.$ The net present value of the liability component is $$3,800,000.$ Interest is payable semiannually on Oct $1^{st}$ and April $1^{st}.$ Market interest for similar nonconvertible bonds is $10\%.3,52$

$4m10\%=400K$

$3\mathrm{.}8m70=2\mathrm{.}66K$

$5.$ May $1^{st},$ Phelps repurchased at cash $1,000$ ordinary shares of its own shares at $$100$ per share.

$T.S(\frac{1}{C}\frac{?}{lo{n}^{-2}})sem$

CHClk

sentm

$6.$ September ${15}^{th},$ Phelps declared $$60,000$ cash$-$dividends, of which $$20,000$ were liquidating dividends.

$0of$ the treasury shares $at$ $$90$ for cash.

$60090=54000100=60,00.$

October $2^{nd}2022,$ Phelps converted the bonds into ordinary shares whereas each $$100$ of bonds is converted to $3$ ordinary shares.

Cb

November $8^{th},$ Phelps announced and paid property $($land$)$ dividends. The land has a book value of $$100,000.$ As of July, the fair market value of the land was $$120,000$

Assuming that Phelps, on October $2^{nd}2022,$ repurchased the convertible bonds instead of converting them into ordinary shares. At that date, the fair value of the convertible bonds was $$3,950,000,$ while the fair value of the liability component was $3,875,000.$

Requirements:

$3,45m-3,875m$

$3,870m=75000$

CBr

Prepare journal entries for all transactions above $(1-10)$