1. On February 1, 2018, Ellison Co. issued eight-year bonds witha face value of $10,000,000 and a stated interest rate of 7%,payable semiannually on July 1 and January 1. The bonds were soldto yield 8%. The bonds are callable at 101 and convertible.
- The issue price of the bonds is
- Record the journal entries for February 2018 at issuance andJuly 1.
2. Using the information above, assume that the bonds issued byEllison Co. are convertible with each $1,000 convertible into 25shares of common stock. Assume that Ellisonconverts $5,000,000 of bonds on July 1, 2020 into common stock.Prepare the following entries:
a. Entry at February 1, 2018 for issuance of the convertiblebonds
b. Entry at July 1, 2020 for the conversion of $5,000,000 ofbonds.
3. Using the information above, assume that the remaining bondsare called on December 31, 2020.
