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Chapter_16_Solutions

# Chapter_16_Solutions - SOLUTIONS TO EXERCISES EXERCISE...

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16-13 SOLUTIONS TO EXERCISES EXERCISE 16-1 (15–20 minutes) 1. Cash (\$20,000,000 X .99) .................................... 19,800,000 Discount on Bonds Payable .............................. 200,000 Bonds Payable ............................................... 20,000,000 Unamortized Bond Issue Costs ....................... 70,000 Cash .................................................................. 70,000 2. Cash .......................................................................... 19,600,000 Discount on Bonds Payable .............................. 1,200,000 Bonds Payable ............................................... 20,000,000 Paid-in Capital—Stock Warrants ............. 800,000 Value of bonds plus warrants (\$20,000,000 X .98) \$19,600,000 Value of warrants (200,000 X \$4) 800,000 Value of bonds \$18,800,000 3. Debt Conversion Expense ................................. 75,000 Bonds Payable ....................................................... 10,000,000 Discount on Bonds Payable ..................... 55,000 Common Stock .............................................. 1,000,000 Paid-in Capital in Excess of Par .............. 8,945,000* Cash .................................................................. 75,000 *[(\$10,000,000 – \$55,000) – \$1,000,000] EXERCISE 16-2 (15–20 minutes) (a) Interest Payable (\$200,000 X 2/6) ..................... 66,667 Interest Expense (\$200,000 X 4/6) + \$2,712.. 136,045 Discount on Bonds Payable ..................... 2,712 Cash (\$4,000,000 X 10% ÷ 2) ..................... 200,000 Calculations: Par value \$4,000,000 Issuance price 3,920,000 Total discount \$ 80,000

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16-14 EXERCISE 16-2 (Continued) Months remaining 118 Discount per month \$678 (\$80,000 ÷ 118) Discount amortized \$2,712 (4 X \$678) (b) Bonds Payable .............................................................. 1,500,000 Discount on Bonds Payable .............................. 27,458 Common Stock (30,000 X \$20) .......................... 600,000 Paid-in Capital in Excess of Par ....................... 872,542* *(\$1,500,000 – \$27,458) – \$600,000 Calculations: Discount related to 3/8 of the bonds (\$80,000 X 3/8) \$30,000 Less discount amortized [(\$30,000 ÷ 118) X 10] 2,542 Unamortized bond discount \$27,458 EXERCISE 16-3 (10–20 minutes) Conversion recorded at book value of the bonds: Bonds Payable ....................................................................... 500,000 Premium on Bonds Payable .............................................. 7,500 Preferred Stock (500 X 20 X \$50) ............................ 500,000 Paid-in Capital in Excess of Par (Preferred Stock) ...................................................... 7,500 EXERCISE 16-4 (15–20 minutes) (a) Cash .................................................................................. 10,800,000 Bonds Payable ..................................................... 10,000,000 Premium on Bonds Payable ............................ 800,000 (To record issuance of \$10,000,000 of 8% convertible debentures for \$10,800,000. The bonds mature in twenty years, and each \$1,000 bond is convertible into five shares of \$30 par value common stock)
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Chapter_16_Solutions - SOLUTIONS TO EXERCISES EXERCISE...

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