On october 1 2011 2500000 of these bonds were converted, Ask an Expert

Accounting

Garr Co. issued $5,000,000 of 12%, 5 year convertible bonds on December 1, 2010 for $5,020,800 plus accrued interest. The bonds were dated April 1, 2010 with interest payable April 1 and October 1. Bond premium is amortized each interest period on a straight-line basis. Garr Co. has a fiscal year end of September 30.

On October 1, 2011, $2,500,000 of these bonds were converted into 35,000 shares of $15 par common stock. Accrued interest was paid in cash at the time of conversion.

Instructions:

(a) Prepare the entry to record the interest expense at April 1, 2011. Assume that interest payable was credited when the bonds were issued. (round to nearest $)

(b) Prepare the entry to record the conversion on October 1, 2011. Assume that the entry to record amortization of the bond premium and interest payment has been made.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M976050

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