On January 1, 2017, Bridgeport Corporation issued $4,100,000 of 10-year, 8% convertible debentures at 104. Interest is

Question

On January 1, 2017, Bridgeport Corporation issued $4,100,000 of 10-year, 8% 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 Bridgeport Corporation $102 par value common stock after December 31, 2018. On January 1, 2019, $410,000 of debentures are converted into common stock, which is then selling at $111. An additional $410,000 of debentures are converted on March 31, 2019. The market price of the common stock is then $116. 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 (b) January 1, 2019. (c) March 31, 2019 (d)June 30, 2019.

Help In Homework · Accepted Answer

Answer a) Bridgeport Corporation Journal Entries Event Particulars Debit ($) Credit ($) 31.12.2018 Bond interest Expense a/c Dr 155,800 Premium on Bonds Payable a/c Dr 8,200 To Cash 164,000 ($4,100,000 * 8% * 6/ 12) ($164,000 * 1/ 20) Answer b) Bridgeport Corporation Journal Entries 1.1.2019 Bonds Payable a/c Dr 410,000 Premium on Bonds Payable a/c Dr 13,120 To Common stock 334,560 To Paid-in Capital in Excess of Par 88,560 [8 * $102 * ($410,000/ $1,000)] Total premium ($4,100,000 * 0.04) 164,000 Premium amortized ($164,000 * 2/ 10) 32,800 Balance 131,200 Bonds converted ($410,000/ $4,100,000) 10% Related premium ($131,200 * 10%) 13,120 Answer c) Bridgeport Corporation Journal Entries 31.3.2019 Bond Interest Expense a/c Dr 7,790 Premium on Bonds Payable a/c Dr 410 To Bond interest payable 8,200 ($13,120/ 8 years) * 3/ 12 ($410,000 * 8% * 3/ 12) Bonds Payable a/c Dr 410,000 Premium on Bonds Payable a/c Dr. 12,710 To Common stock 334,560 To Paid-in Capital in Excess of Par 88,150 Premium as of January 1, 2019 for $410,000 of bonds 13,120 $13,120/ 8 years remaining * 3/12 410 Premium as of March 31, 2009 for $400,000 of bonds 12,710 Answer d) Bridgeport Corporation Journal Entries 30.6.2019 Bond Interest Expense a/c Dr 124,640 Premium on Bonds Payable a/c Dr 6,560 Bond Interest Payable a/c Dr 8,200 To Cash 139,400 [Premium to be amortized: ($164,000 * 80%) * 1/ 20 = $6 560 Total to be paid: ($3,280,000 * 8%/ 2) + $8,200= $139,400 ($410,000 * 8% * 1/4) = 8,200

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On January 1, 2017, Bridgeport Corporation issued $4,100,000 of 10-year, 8% convertible debentures at 104

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Archived Solution

Event	Particulars	Debit ($)	Credit ($)
31.12.2018	Bond interest Expense a/c Dr	155,800
	Premium on Bonds Payable a/c Dr	8,200
	To Cash		164,000
	($4,100,000 * 8% * 6/ 12)
	($164,000 * 1/ 20)

1.1.2019	Bonds Payable a/c Dr	410,000
	Premium on Bonds Payable a/c Dr	13,120
	To Common stock		334,560
	To Paid-in Capital in Excess of Par		88,560
	[8 * $102 * ($410,000/ $1,000)]
	Total premium
	($4,100,000 * 0.04)	164,000
	Premium amortized
	($164,000 * 2/ 10)	32,800
	Balance	131,200
	Bonds converted
	($410,000/ $4,100,000)	10%
	Related premium
	($131,200 * 10%)	13,120

31.3.2019	Bond Interest Expense a/c Dr	7,790
	Premium on Bonds Payable a/c Dr	410
	To Bond interest payable		8,200
	($13,120/ 8 years) * 3/ 12
	($410,000 * 8% * 3/ 12)
	Bonds Payable a/c Dr	410,000
	Premium on Bonds Payable a/c Dr.	12,710
	To Common stock		334,560
	To Paid-in Capital in Excess of Par		88,150
	Premium as of January 1, 2019 for $410,000 of bonds	13,120
	$13,120/ 8 years remaining * 3/12	410
	Premium as of March 31, 2009 for $400,000 of bonds	12,710

30.6.2019	Bond Interest Expense a/c Dr	124,640
	Premium on Bonds Payable a/c Dr	6,560
	Bond Interest Payable a/c Dr	8,200
	To Cash		139,400
	[Premium to be amortized: ($164,000 * 80%) * 1/ 20 = $6 560
	Total to be paid: ($3,280,000 * 8%/ 2) + $8,200= $139,400
	($410,000 * 8% * 1/4) = 8,200