Question - Conversion of Bonds
Telta Inc. issued $15,000,000 of 12%, 40-year convertible bonds on November 1, 2017, at 97 plus accrued interest. The bonds were dated July 1, 2017, with interest payable January 1 and July 1. Bond discount (premium) is amortized semiannually on a straight-line basis. On July 1, 2018, one-half of these bonds were converted into 60,000 shares of $1 par value common stock. Accrued interest was paid in cash at the time of conversion.
Instructions -
(a) Prepare the entry to record the interest expense at December 31, 2017. Assume that accrued interest payable was credited when the bonds were issued. (Round to nearest dollar.)
(b) Prepare the entry(ies) to record the conversion on July 1, 2018. (Book value method is used.) Assume that the entry to record amortization of the bond discount and interest payment has been made.