Prepare Journal Entries to Record Each of the Following Transactions

question 152

Essay

Prepare journal entries to record each of the following transactions for Gordon's Biking Supplies (GBS) on January 1, Year 1.
a. GBS issues $100,000 of convertible bonds at 98% of par.Without the conversion feature, the bonds would have traded at 88% of par.The bonds each have a $1,000 face value and an 8% stated rate.Each bond can be converted into 50 shares of stock with a $5 par value.The bonds have a 10-year maturity and the straight line method of discount amortization is used.Interest is paid annually on January 1.
b. Prepare any entry necessary on December 31, Year 1.
c. Prepare any entry necessary on December 31, Year 2.
d. On January 1, Year 3, $25,000 par value of bonds are converted when the market price per share $25.(Hint: do not record a gain or loss on conversion.)

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Definitions:

Scenic Beauty

The visual appeal and aesthetic value of a particular landscape or location, often contributing to its desirability for recreation and tourism.

Bat House

A man-made structure designed to provide roosting sites for bats, facilitating natural pest control and biodiversity.

Policy Solution

A strategy or plan of action designed to address a particular public issue or problem.

Free Market

An economic system where prices for goods and services are determined by the open market and consumers, with minimal governmental intervention and regulation.