E15.1 (LO 1,2) Issuance and Conversion of Bonds
For each of the unrelated transactions described below, present the entry(ies) required to record each
transaction.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into
the yellow shaded input cells.
1. Grand Corp. issued convertible bonds.
Par value of bonds issued $ 20,000,000
Issue price 99
Stated rate 10%
Estimate by investment banker of the price at which
the bonds could have been sold if they had not been
convertible 95
Expenses of issuing the bonds $ 70,000
Debit Credit
2. Hoosier Company issued bonds. One detachable stock warrant was issued with each bond.
Par value of bonds $ 20,000,000
Issue price 98
Stated rate 10%
Par value of each bond $ 100
Selling price of each warrant at time of issuance $ 4
Debit Credit
3. Suppose Sepracor, Inc. called its convertible debt in 2020. The company records the conversion
using the book value method. Assume the following related to the transaction.
,Conversion of 11%, $10,000,000 par value bonds on July 1, 2020 into:
Shares of $1 par value common stock 1,000,000
Balance of unamortized discount on July 1 applicble to the bonds $ 55,000
Additional payment to induce conversion of bonds $ 75,000
Debit Credit
, Solution: E15.1 (LO 1,2) Issuance and Conversion of Bonds
For each of the unrelated transactions described below, present the entry(ies) required to record each
transaction.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into
the yellow shaded input cells.
1. Grand Corp. issued convertible bonds.
Par value of bonds issued $ 20,000,000
Issue price 99
Stated rate 10%
Estimate by investment banker of the price at which
the bonds could have been sold if they had not been
convertible 95
Expenses of issuing the bonds $ 70,000
Debit Credit
Cash 19,800,000
Discount on Bonds Payable 200,000
Bonds Payable 20,000,000
2. Hoosier Company issued bonds. One detachable stock warrant was issued with each bond.
Par value of bonds $ 20,000,000
Issue price 98
Stated rate 10%
Par value of each bond $ 100
Selling price of each warrant at time of issuance $ 4
Debit Credit
Cash 19,600,000
Discount on Bonds Payable 1,200,000
Bonds Payable 20,000,000
Paid-in Capital - Stock Warrants 800,000
3. Suppose Sepracor, Inc. called its convertible debt in 2020. The company records the conversion
using the book value method. Assume the following related to the transaction.
Conversion of 11%, $10,000,000 par value bonds on July 1, 2020 into:
Shares of $1 par value common stock 1,000,000
Balance of unamortized discount on July 1 applicble to the bonds $ 55,000
Additional payment to induce conversion of bonds $ 75,000
For each of the unrelated transactions described below, present the entry(ies) required to record each
transaction.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into
the yellow shaded input cells.
1. Grand Corp. issued convertible bonds.
Par value of bonds issued $ 20,000,000
Issue price 99
Stated rate 10%
Estimate by investment banker of the price at which
the bonds could have been sold if they had not been
convertible 95
Expenses of issuing the bonds $ 70,000
Debit Credit
2. Hoosier Company issued bonds. One detachable stock warrant was issued with each bond.
Par value of bonds $ 20,000,000
Issue price 98
Stated rate 10%
Par value of each bond $ 100
Selling price of each warrant at time of issuance $ 4
Debit Credit
3. Suppose Sepracor, Inc. called its convertible debt in 2020. The company records the conversion
using the book value method. Assume the following related to the transaction.
,Conversion of 11%, $10,000,000 par value bonds on July 1, 2020 into:
Shares of $1 par value common stock 1,000,000
Balance of unamortized discount on July 1 applicble to the bonds $ 55,000
Additional payment to induce conversion of bonds $ 75,000
Debit Credit
, Solution: E15.1 (LO 1,2) Issuance and Conversion of Bonds
For each of the unrelated transactions described below, present the entry(ies) required to record each
transaction.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into
the yellow shaded input cells.
1. Grand Corp. issued convertible bonds.
Par value of bonds issued $ 20,000,000
Issue price 99
Stated rate 10%
Estimate by investment banker of the price at which
the bonds could have been sold if they had not been
convertible 95
Expenses of issuing the bonds $ 70,000
Debit Credit
Cash 19,800,000
Discount on Bonds Payable 200,000
Bonds Payable 20,000,000
2. Hoosier Company issued bonds. One detachable stock warrant was issued with each bond.
Par value of bonds $ 20,000,000
Issue price 98
Stated rate 10%
Par value of each bond $ 100
Selling price of each warrant at time of issuance $ 4
Debit Credit
Cash 19,600,000
Discount on Bonds Payable 1,200,000
Bonds Payable 20,000,000
Paid-in Capital - Stock Warrants 800,000
3. Suppose Sepracor, Inc. called its convertible debt in 2020. The company records the conversion
using the book value method. Assume the following related to the transaction.
Conversion of 11%, $10,000,000 par value bonds on July 1, 2020 into:
Shares of $1 par value common stock 1,000,000
Balance of unamortized discount on July 1 applicble to the bonds $ 55,000
Additional payment to induce conversion of bonds $ 75,000
