On December 31, 2014, H company issues 5.5%, 10-year convertible bonds payable with a maturity value of $4,000,000. The semiannual interest dates are June 30 and December 31. The market interest rate is 6%. H company amortizes discount by the effective-interest method.
Requirements
1. Use the PC function in Excel to calculate the issue price of bonds.
2. Using exhibit 9-4 of the bond discount model, prepare an effective-interest method amortization table for the term of the bonds.
3. Journalize the following transactions:
a. Issuance of the bonds on Decemember 31, 2014. Credit convertible bonds payable
b. Payment of interest and amortization of the bond discount on June 30, 2015.
c. Payment of the interest and amortization of the bond discount on December 31, 2015.
d. Conversion by teh bondholders by July 1, 2016, of bonds with face value of 1.6 million dollars into 120,000 shares of H company's $1-par common stock
4. Show how H company would report the remaining bonds payable on its balance sheet at December 31, 2016.