how to do Convertible Bonds Payable?
On December 31, 2006, Tommy Technology Ltd issues 8%, 10 year convertible bonds with a maturity value of $600,000. The semi-annual interest dates are June 30 and December 31. The market interest rate is 9%, and the issue price of the bonds is $560,976. Tommy Technology amortizes bonds by the effective-interest method.
Journalize the following transactions:
a) Issuance of the bonds on December 31,2006. Credit Convertible Bond Payable
b) Payment of interest and amortization of the bonds on June 30, 2007
c) Payment of interest and amortization of the bonds on December 31, 2007
d) Retirement of bonds with face value of $240,000 on July 1, 2008. Tommy pays off the bonds at 102 in the open market.
e) Conversion by the bondholders on July 1, 2008, of bonds with face value of $200,000 into 50,000 shares of Tommy Technology Ltd common shares.
