Question 1 - On January 1, 2013, Fowl Products issued $80 million 6%, 10-year convertible bonds at a net price of $81.6 million. Fowl recently issued similar, but nonconvertible , bonds at 99(that is 99% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Fowl's no par common stock. Fowl records interest by the straight-line method.
On June 1, 2015 Fowl notified bondholders of its intent to call the bonds at a face value plus a 1% call premium on July 1, 2015. By June 30 all bondholders had chosen to convert their bonds into shares as of the interest payment date. On June 30, Fowl paid the semiannual interest and issued the requisite number of shares for the bonds being converted.
Instructions:
Prepare the journal entry for the issuance of bonds by Fowl.
Prepare the journal entry for the June 30, 2013 interest payment
Prepare the journal entries for the June 30 2015, interest payment by Fowl and the conversion of the bonds. (book value method)
Question 2 - On January 1, 2013 Frascom had the following account balances in its shareholder's equity accounts.
Common Stock, $1 par, 250,000 shares issued 250,000
Paid-in Capital -excess of par, common 500,000
Paid-in Capital- excess of par, preferred 100,000
Preferred Stock, $100 par, 10,000 shares outstanding 1,000,000
Retained Earning 2,000,000
Treasury Stock at cost, 5,000 shares. 25,000
During 2013, Frascom, Inc had several transactions relating to common stock.
January 15: Declared a property dividend of 100,000 shares of Slowdown Company (book value of $10 per share, market value $9 per share)
February 17: Distributed the property dividends.
April 10: A 2-for-1 stock split was declared and distributed on outstanding common stock and effected in the form of a stock dividend. The market value of the stock was $4 on this date.
July 18: Declared and distributed a 3% stock dividend on outstanding common stock. The market value is $5 per share.
December 1: Declared a 50 cents per share cash dividend on the outstanding common shares.
December 20: Paid the cash dividend.
Instructions: Without preparing a journal entries, prepare the shareholder's equity section of Fascom's balance sheet as of December 31, 2013. Assume net income is $500,000 for 2013.