ACCOUNTING HOMEWORK -
Q1. On January 1, 2016, Gless Textiles issued $23 million of 8%, 20-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Gless's no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 10% of the issue as an investment.
Required:
A) Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
B) Prepare the journal entries for the June 30, 2020, interest payment by both Gless and Century assuming both use the straight-line method. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
C) On July 1, 2021, when Gless's common stock had a market price of $33 per share, Century converted the bonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (book value method). (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Q2. On January 1, 2016, Gless Textiles issued $12.6 million of 9%, 10-year convertible bonds at 103. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Gless's no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 97 (that is, 97% of face amount). Century Services purchased 10% of the issue as an investment.
Required: Assume Gless Textiles prepares its financial statements according to International Financial Reporting Standards. Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century. (If no journal entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)
Q3. On February 1, 2016, Cromley Motor Products issued 12% bonds, dated February 1, with a face amount of $85 million. The bonds mature on January 31, 2020 (4 years). The market yield for bonds of similar risk and maturity was 14%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $85,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
A) Determine the price of the bonds issued on February 1, 2016. (Enter your answer in whole dollars.)
B) Prepare amortization schedules that indicate Cromley's effective interest expense for each interest period during the term to maturity. (Enter your answers in whole dollars.)
C) Prepare amortization schedules that indicate Barnwell's effective interest revenue for each interest period during the term to maturity. (Enter your answers in whole dollars.)
D) Prepare the journal entries to record the issuance of the bonds by Cromley and Barnwell's investment on February 1, 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)
E) Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)