Question

Flounder Inc. issued $2,840,000 par value, 7% convertible bonds at 97 for cash. If the bonds had not included the conversion feature, they would have sold for 95. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Given that,

Flounder Inc. issued convertible bonds = $2,840,000 par value

Interest rate = 7%

Sold for cash = $97

If the bonds had not included the conversion feature, then

Sold for = $95

Therefore, the journal entry is as follows:

Cash A/c ($2,840,000 * 0.97) Dr. $2,754,800

Discount on issue of Bond A/c Dr. $85,200

To 7% Convertible Bonds payable $2,840,000