Presented Below Are Three Independent Situations

question 184

Essay

Presented below are three independent situations:
(a) Strike Corporation purchased $380,000 of its bonds on June 30, 2018, at 102 and immediately retired them. The carrying value of the bonds on the retirement date was $371,500. The bonds pay annual interest and the interest payment due on June 30, 2018, has been made and recorded.
(b) Worton, Inc. purchased $400,000 of its bonds at 96 on June 30, 2018, and immediately retired them. The carrying value of the bonds on the retirement date was $395,000. The bonds pay annual interest and the interest payment due on June 30, 2018, has been made and recorded.
(c) Mountain Company has $80,000, 10%, 12-year convertible bonds outstanding. These bonds were sold at face value and pay annual interest on June 30 and December 31 of each year. The bonds are convertible into 40 shares of Mountain $4 par value common stock for each $1,000 par value bond. On December 31, 2018, after the bond interest has been paid, $30,000 par value of bonds were converted. The market value of Mountain's common stock was $38 per share on December 31, 2016.
Instructions
For each of the independent situations, prepare the journal entry to record the retirement or conversion of the bonds.

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Definitions:

Administrative Costs

Expenses related to the general operation of an organization, such as salaries of non-production staff, office supplies, and utilities.

Ethics Competency

The ability to understand and apply ethical principles and standards in decision-making processes.

Enron

A former American energy, commodities, and services company based in Houston, Texas, known for one of the biggest accounting frauds and corporate scandals in history.

Span of Control

The number of direct reports or subordinates that a manager or leader oversees, affecting managerial efficiency and organizational structure.