LMN Company Reported the Following Amounts on Its Balance Sheet

question 90

Essay

LMN Company reported the following amounts on its balance sheet at July 31,2019:
Liabilities

Equity

Additional information
1.The bonds pay interest each July 31.Each $1,000 bond is convertible into 5 common shares.The bonds were originally issued to yield 10%.On July 31,2019,all the bonds were converted after the final interest payment was made.LMN uses the book value method to record bond conversions as recommended under IFRS.
2.No other share or bond transactions occurred during the year.
Required:
a.Prepare the journal entry to record the bond interest payment on July 31,2019.
b.Calculate the total number of common shares outstanding after the bonds' conversion on July 31,2019.
c.Prepare the journal entry to record the bond conversion.

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Definitions:

Oversubscribed

A situation in which the demand for an IPO or a new issue of securities exceeds the number of shares available.

Rights Offering

A method by which a company raises capital through issuing new shares to existing shareholders at a predetermined price for a fixed period.

Ownership Percentage

Ownership percentage refers to the fraction or percentage of a company that is owned by a particular shareholder or group of shareholders.

Indirect Cost

Costs that are not directly attributable to a specific product, activity, or project, but are necessary for the general operation of the business.