Accounting homework help!? Please :) Re: Redemption/Conversion of Bonds?

My book does not explain the worksheet my professor gave us. I'm confused about the following problems. My issue with accounting is I tend to overcomplicate it. :( I'm supposed to prepare a journal entry for each situation. Any help is greatly appreciated, Thank you!

1. A corporation retired $130,000 face value, 12% bonds on June 30, 2014, at 102. Carrying value is $117,500. Bonds pay semiannual interest, and interest payment due on June 30, 2014 has been made/recorded.

2. A company has $80,000, 8%, 12-year convertible bonds outstanding. These bonds were sold at face value and pay semiannual interest on June 30 and Dec. 31. The bonds are convertible into 30 shares of $5 par value common stock for each $1,000 worth of bonds. On Dec. 31, 2014 after the bond interest has been paid, $40,000 face value bonds were converted. The market price of common stock was $44 per share on December 31, 2014.

I know I'm not doing these correctly because my debits and credits are not matching, but I'm not sure exactly where I'm going wrong. I've been trying to figure it out now for almost two hours.

3 Answers

  • 7 years ago
    Favorite Answer

    1. The bonds were redeemed at a price of 102, meaning that they paid 102% of the face value, or $132,600. Dr Bonds Payable $117,500, Cr Cash $132,600, and debit loss on redemption for the difference.

    2. $40,000 face value of bonds were converted, so 1,200 shares were issued. Dr Bonds Payable $40,000, credit common stock $6,000 and credit additional paid-in capital $34,000

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  • Corey
    Lv 4
    4 years ago

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