Exercise 16-6 On January 1, 2017, Stellar Corporation issued $4,060,000 of 10-year, 9% convertible debentures...
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Accounting
Exercise 16-6
On January 1, 2017, Stellar Corporation issued $4,060,000 of 10-year, 9% 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 Stellar Corporation $101 par value common stock after December 31, 2018. On January 1, 2019, $406,000 of debentures are converted into common stock, which is then selling at $111. An additional $406,000 of debentures are converted on March 31, 2019. The market price of the common stock is then $117. 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, 2018. | (c) | March 31, 2019. | |||
| (b) | January 1, 2019. | (d) | June 30, 2019. |
Record the conversions using the book value method.
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