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  3. on july 1, 2020, pearl ltd., which follows aspe, i

On July 1, 2020, Pearl Ltd., which follows ASPE, issued 1,000 convertible, five-year, $1,000 bonds....

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Accounting

On July 1, 2020, Pearl Ltd., which follows ASPE, issued 1,000 convertible, five-year, $1,000 bonds. Each bond is convertible into 20common shares at the bondholders option. On the date of issuance, the bonds conversion rights were valued at $51,000. On July 1, 2023, the bonds had a carrying value on Pearls books of $973,000, and the fair market value of the bonds without the convertible option was $978,000.

Assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2023. Prepare the journal entry to record the conversion. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

Assume instead that Pearl paid the bondholders an incentive of $17,000 to convert their bonds to common shares, and that all the bondholders agreed to convert their bonds to common shares on July 1, 2023. Prepare the journal entry to record the conversion. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

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