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1. On February 1, 2018, Ellison Co. issued eight-year bonds with a face value of $10,000,000...

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Accounting

1. On February 1, 2018, Ellison Co. issued eight-year bonds witha face value of $10,000,000 and a stated interest rate of 7%,payable semiannually on July 1 and January 1. The bonds were soldto yield 8%. The bonds are callable at 101 and convertible.

  1. The issue price of the bonds is
  2. Record the journal entries for February 2018 at issuance andJuly 1.

2. Using the information above, assume that the bonds issued byEllison Co. are convertible with each $1,000 convertible into 25shares of common stock.    Assume that Ellisonconverts $5,000,000 of bonds on July 1, 2020 into common stock.Prepare the following entries:

a. Entry at February 1, 2018 for issuance of the convertiblebonds

b. Entry at July 1, 2020 for the conversion of $5,000,000 ofbonds.

3. Using the information above, assume that the remaining bondsare called on December 31, 2020.

Answer & Explanation Solved by verified expert
3.7 Ratings (634 Votes)
1a Issue Price Present value of lumpsum Present value of payments Present value of 10000000 due in 8 years 5339082 n16r7235 Interest payment 10000000 35 350000 Present    See Answer
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