Issue convertible bonds at a discount; amortize by the effectiveinterest method; convert bonds; report bonds payable on the balance sheet
Response to the following problem:
On December 31, 2014, Zunniga Corp. issues 4%, 10-year convertible bonds payable with a maturity value of $5,000,000. The semiannual interest dates are June 30 and December 31. The market interest rate is 5%. Zunniga Corp. amortizes bond discount by the effective-interest method.