1. Petrenko Corporation has outstanding 2,780 $1,700 bonds, each convertible into 65 shares of $11 par value common stock. The bonds are converted on December 31, 2014, when the unamortized discount is $30,840 and the market price of the stock is $21 per share. Record the conversion using the book value approach.
2. Pechstein Corporation issued 2,780 shares of $8 par value common stock upon conversion of 1,200 shares of $50 par value preferred stock. The preferred stock was originally issued at $58 per share. The common stock is trading at $27 per share at the time of conversion. Record the conversion of the preferred stock.
3. On January 1, 2014 (the date of grant), Lutz Corporation issues 2,070 shares of restricted stock to its executives. The fair value of these shares is $111,600, and their par value is $11,200. The stock is forfeited if the executives do not complete 3 years of employment with the company.
Prepare journal entries for January 1, 2014, and on December 31, 2014, assuming the service period is 3 years.
4. On January 1, 2014, Barwood Corporation granted 2,310 shares of restricted $5 par value common stock to executives. The market price (fair value) of the stock is $70 per share on the date of grant. The period of benefit is 2 years.
Prepare Barwood’s journal entries for January 1, 2014, and December 31, 2014 and 2015.
5. Vargo Company has bonds payable outstanding in the amount of $504,500, and the Premium on Bonds Payable account has a balance of $7,600. Each $1,000 bond is convertible into 20 shares of preferred stock of par value of $50 per share. All bonds are converted into preferred stock.
Assuming that the book value method was used, what entry would be made?
6. Eisler Corporation issued 2,490 $1,000 bonds at 102. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 99, and the warrants had a market price of $44.
Use the proportional method to record the issuance of the bonds and warrants.
7. McIntyre Corporation issued 2,560 $1,500 bonds at 102. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling separately at 98. The market price of the warrants without the bonds cannot be determined.
Use the incremental method to record the issuance of the bonds and warrants.
8. Illiad Inc. has decided to raise additional capital by issuing $176,400 face value of bonds with a coupon rate of 11%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $140,250, and the value of the warrants in the market is $24,750. The bonds sold in the market at issuance for $161,500.
(a) What entry should be made at the time of the issuance of the bonds and warrants? (b) Prepare the entry if the warrants were nondetachable
9. On May 1, 2014, Friendly Company issued 3,220 $1,000 bonds at 102. Each bond was issued with one detachable stock warrant. Shortly after issuance, the bonds were selling at 97, but the fair value of the warrants cannot be determined.
(a) Prepare the entry to record the issuance of the bonds and warrants.(b) Assume the same facts as part (a), except that the warrants had a fair value of $22. Prepare the entry to record the issuance of the bonds and warrants.