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Pearl Inc. issued $3,570,000 par value, 7% convertible bonds at 98 for cash. If the bonds...

Pearl Inc. issued $3,570,000 par value, 7% convertible bonds at 98 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.

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Answer #1

The Bond is issued at a discount of $2 at $98 for cash.So the point that if the bonds had not included the conversion feature they would have sold at $95 is an irrelivant point as we have to record the Journal entry when the bond is issued at $98

So the Journal entry will be:

Cash Dr 3,498,600(35,700*98)

Discount on Bond Dr 71,400(35,700*2)

Bonds Payable 3,570,000

(Bonds issued at 2% discount)   

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