On January 1, 2023, Culver Corporation, which follows ASPE, issued a series of 504 convertible bonds, maturing in five years. The face amount of each bond was $1,000. Culver received $531, 400 for the bond issue. The bonds paid interest every December 31 at 5%; the market interest rate for bonds with a comparable level of risk was 6%. The bonds were convertible to common shares at a rate of ten common shares per bond. Culver amortized bond premiums and discounts using the effective interest method, and the company's year - end was December 31. On January 1, 2024, 101 of the bonds were converted into common shares. On June 30, 2024, another 101 bonds were converted into common shares. The bondholders chose to forfeit the accrued interest on these bonds. On January 1, 2025, when the fair value of the bonds was $296, 400 due to a decrease in market interest rates, a conversion inducement of $20/ bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 302 bonds were converted into common shares at that time. a. Prepare the journal entry at January 1, 2023. b. Prepare the journal entry at December 31, 2023. c. Prepare the journal entry at January 1, 2024. d. Prepare the journal entry at June 30, 2024. e. Prepare the journal entry at December 31, 2024. f. Prepare the journal entry at January 1, 2025.
On January 1, 2023, Culver Corporation, which follows ASPE, issued a series of 504 convertible bonds, maturing in five years. The face amount of each bond was $1,000. Culver received $531, 400 for the bond issue. The bonds paid interest every December 31 at 5%; the market interest rate for bonds with a comparable level of risk was 6%. The bonds were convertible to common shares at a rate of ten common shares per bond. Culver amortized bond premiums and discounts using the effective interest method, and the company's year - end was December 31. On January 1, 2024, 101 of the bonds were converted into common shares. On June 30, 2024, another 101 bonds were converted into common shares. The bondholders chose to forfeit the accrued interest on these bonds. On January 1, 2025, when the fair value of the bonds was $296, 400 due to a decrease in market interest rates, a conversion inducement of $20/ bond was offered to the remaining bondholders to convert their bonds to common shares. All of the remaining 302 bonds were converted into common shares at that time. a. Prepare the journal entry at January 1, 2023. b. Prepare the journal entry at December 31, 2023. c. Prepare the journal entry at January 1, 2024. d. Prepare the journal entry at June 30, 2024. e. Prepare the journal entry at December 31, 2024. f. Prepare the journal entry at January 1, 2025.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 15MCQ
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Transcribed Image Text:On January 1, 2023, Culver Corporation, which follows ASPE, issued a series of 504 convertible bonds,
maturing in five years. The face amount of each bond was $1,000. Culver received $531, 400 for the bond
issue. The bonds paid interest every December 31 at 5%; the market interest rate for bonds with a
comparable level of risk was 6%. The bonds were convertible to common shares at a rate of ten common
shares per bond. Culver amortized bond premiums and discounts using the effective interest method, and
the company's year - end was December 31. On January 1, 2024, 101 of the bonds were converted into
common shares. On June 30, 2024, another 101 bonds were converted into common shares. The
bondholders chose to forfeit the accrued interest on these bonds. On January 1, 2025, when the fair value
of the bonds was $296, 400 due to a decrease in market interest rates, a conversion inducement of $20/
bond was offered to the remaining bondholders to convert their bonds to common shares. All of the
remaining 302 bonds were converted into common shares at that time. a. Prepare the journal entry at
January 1, 2023. b. Prepare the journal entry at December 31, 2023. c. Prepare the journal entry at
January 1, 2024. d. Prepare the journal entry at June 30, 2024. e. Prepare the journal entry at December
31, 2024. f. Prepare the journal entry at January 1, 2025.
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