Question

Swisher Company issued $1,500,000 of bonds on January 1, 2017.

Prepare the journal entry to record the issuance of the bonds if they are issued at (1) 100, (2) 95, and (3), 101.

Prepare the journal entry to record the redemption of the bonds at maturity, assuming the bonds were issued at 100.

Prepare the journal entry to record the redemption of the bonds before maturity at 95. Assume the balance in Premium on Bonds Payable is $8,000.

Prepare the journal entry to record the conversion of the bonds into 55,000 shares of $10 per share par value common stock. Assume the bonds were issued at par.

Answer 1

Journal entries :

No	Account and explanation	Debit	Credit
1)	Cash	1,500,000
	Bonds payable		1,500,000
2	Cash (1500000*.95)	1,425,000
	Discount on bonds payable	75,000
	Bonds payable		1,50,0000
3	Cash (1,500,000*1.01)	1,515,000
	Bonds payable		1,500,000
	Premium on bonds payable		15,000

redemption of bonds :

Date	Account and explanation	Debit	Credit
	Bonds payable	1,500,000
	Cash		1,500,000
	(To record bond redemption)

3) Journal entry

Date	account and explanation	debit	credit
	Bonds payable	1,500,000
	Premium on bonds payable	8,000
	Gain on redemption on bonds		83,000
	Cash (1,500,000*.95)		1,425,000

Conversion

Date	account and explanation	debit	credit
	Bonds payable	1,500,000
	Common Stock		550,000
	Paid in capital in excess of par value-Common Stock		950,000