On January 1, 2020, Crane Corporation issued $8 million of 10-year, 7% convertible debentures at 106. Investment bankers believe that the debenture would have sold at 103 without the conversion privilege. Interest is to be paid semi-annually on June 30 and December 31. Each $1.000 debenture can be converted into 5 common shares of Crane after December 31, 2021. On January 1, 2022, $496,000 of debentures are converted into common shares, and on March 31, 2022, an additional $496,000 of debentures are converted into common shares. Fair value of Crane's common shares is $106 and $111 per share on January 1, 2022, and March 31, 2022, respectively. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis. Crane follows ASPE. (a) Make the necessary journal entries using the book value method. (Hint: March 31, 2022: Accrue interest on bonds to be converted as a first entry) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round intermediate percentage calculations to 3 decimal places, eg. 1.246% and final answers te A decimal nlacci

On January 1, 2020, Crane Corporation issued $8 million of 10-year, 7% convertible debentures at 106. Investment bankers believe that the debenture would have sold at 103 without the conversion privilege. Interest is to be paid semi-annually on June 30 and December 31. Each $1.000 debenture can be converted into 5 common shares of Crane after December 31, 2021. On January 1, 2022, $496,000 of debentures are converted into common shares, and on March 31, 2022, an additional $496,000 of debentures are converted into common shares. Fair value of Crane's common shares is $106 and $111 per share on January 1, 2022, and March 31, 2022, respectively. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis. Crane follows ASPE. (a) Make the necessary journal entries using the book value method. (Hint: March 31, 2022: Accrue interest on bonds to be converted as a first entry) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round intermediate percentage calculations to 3 decimal places, eg. 1.246% and final answers te A decimal nlacci

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 3C

See similar textbooks

Similar questions

Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were issued on May 4. The 7% convertible bonds have a face value of 80,000 and were issued in 2016 at par. Each 1,000 bond is convertible into 25 shares of common stock; to date, none of the bonds have been converted. During 2019, the company earned net income of 79,200 and was subject to an income tax rate of 30%. Required: Compute the 2019 diluted earnings per share.
Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.
On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.
On January 1, 2020, Gottlieb Corporation issued $3,860,000 of 10-year, 8% convertible debentures at 104. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into eight shares of Gottlieb Corporation $102 par value common stock after December 31, 2021. On January 1, 2022, $386000 of debentures are converted into common stock, which is then selling at $113. An additional $386,000 of debentures are converted on March 31, 2022. The market price of the common stock is then $119. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis. Instructions Make the necessary journal entries for: a1)january 1, 2020 a. December 31, 2021. b. January 1, 2022. c. March 31, 2022. d. June 30, 2022. Record the conversions using the book value method.
On January 1, 2020, Cullumber Corporation issued $8 million of 10–year, 7% convertible debentures at 104. Investment bankers believe that the debenture would have sold at 102 without the conversion privilege. Interest is to be paid semi-annually on June 30 and December 31. Each $1,000 debenture can be converted into 4 common shares of Cullumber after December 31, 2021. On January 1, 2022, $464,000 of debentures are converted into common shares, and on March 31, 2022, an additional $464,000 of debentures are converted into common shares. Fair value of Cullumber's common shares is $111 and $116 per share on January 1, 2022, and March 31, 2022, respectively. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis. Cullumber follows ASPE. Make the necessary journal entries using the book value method. (Hint: March 31, 2022: Accrue interest on bonds to be converted as a first entry.) a) Dec.31,2021: b)Jan.1,2022:…
On February 18, 2018, Union Corporation purchased 10,000 shares of IBM bonds as a long-term investment for$600,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2018, and December 31, 2019, the market value of the bonds was $580,000 and $610,000, respectively.Required:1. What is the appropriate reporting category for this investment? Why?2. Prepare the adjusting entry for December 31, 2018.3. Prepare the adjusting entry for December 31, 2019.
Ac On January 1, 2020, Crane Corporation issued $8 million of 10-year, 7% convertible debentures at 106. Investment bankers believe that the debenture would have sold at 103 without the conversion privilege. Interest is to be paid semi-annually on June 30 and December 31. Each $1.000 debenture can be converted into 5 common shares of Crane after December 31, 2021. On January 1, 2022, $496,000 of debentures are converted into common shares, and on March 31, 2022, an additional $496,000 of debentures are converted into common shares. Fair value of Crane's common shares is $106 and $111 per share on January 1, 2022, and March 31, 2022, respectively. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis. Crane follows ASPE. Ac Qu (a) Qu Acc Make the necessary journal entries using the book value method. (Hint: March 31, 2022: Accrue interest on bonds to be converted as a first entry.) (Credit account titles are automatically…
On January 1, 2020, Swifty Corporation issued $4,180,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into 8 shares of Swifty Corporation $102 par value common stock after December 31, 2021. On January 1, 2022, $418,000 of debentures are converted into common stock, which is then selling at $111. An additional $418,000 of debentures are converted on March 31, 2022. The market price of the common stock is then $116. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis. Make the necessary journal entries for: (a) December 31, 2021. (c) ê (b) January 1, 2022. March 31, 2022. (d) June 30, 2022. Record the conversions using the book value method. (Credit account titles are automatically Indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for…
On January 1, 2020, Riverbed Corporation issued $3,600,000 of 10-year, 8% convertible debentures at 104. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into 8 shares of Riverbed Corporation $100 par value common stock after December 31, 2021.On January 1, 2022, $360,000 of debentures are converted into common stock, which is then selling at $109. An additional $360,000 of debentures are converted on March 31, 2022. The market price of the common stock is then $114. Accrued interest at March 31 will be paid on the next interest date.Bond premium is amortized on a straight-line basis.Make the necessary journal entries for: (a) December 31, 2021. (c) March 31, 2022. (b) January 1, 2022. (d) June 30, 2022. Record the conversions using the book value method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account…
On February 18, 2021, Union Corporation purchased 1,311 IBM bonds as a long-term investment at their face value for a total of $1,311,000. Union will hold the bonds indefinitely, and may sell them if their price increases sufficiently. On December 31, 2021, and December 31, 2022, the market value of the bonds was $1,273,000 and $1,330,000, respectively. Required: 2. & 3. Prepare the adjusting entry for December 31, 2021 and 2022. (If no entry is required for a
In 2019, Crane Ltd. issued $48,000 of 9% bonds at par, with each $1,000 bond being convertible into 100 common shares. The company had revenues of $77,300 and expenses of $40,200 for 2020, not including interest and taxes (assume a tax rate of 20%). Throughout 2020, 1,400 common shares were outstanding, and none of the bonds were converted or redeemed. (For simplicity, assume that the convertible bonds’ equity element is not recorded.) Calculate diluted earnings per share for the year ended December 31, 2020. (Round answer to 2 decimal places, e.g. 15.25.) Diluted earnings per share
On June 30, 2021, Marc Industries had outstanding $800 million of 8% convertiblebonds that mature on June 30, 2022. Interest is payable each year on June 30 andDecember 31. The bonds are convertible into 60 million shares of $10 par commonstock. At June 30, 2021, the unamortized balance in the discount on bonds payableaccount was $40 million. On June 30, 2021, half the bonds were converted whenMarc's common stock had a market price of $30 per share. When recording theconversion, Marc should credit paid-in capital–excess of par:a. $60 million.b. $80 million.c. $100 million.d. $120 million Please show solution step by step