Question

On January 1, 2016, Gless Textiles issued $11 million of 8%, 20-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Gless’s no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 20% of the issue as an investment.

Required:

1.

Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet A. Record the issuance of the bonds by Gless. B. Record the purchase of the bond investment by Century. Note: Enter debits before credits. No journal entry required Accounts receivable Allowance for uncollectible accounts Bond investment Bonds payable Building Cash Common stock Conversion expense Convertible bonds payable Debt issue costs Debt issue expense Discount on bond investment Discount on bonds payable Discount on notes payable Equipment Equity—conversion option Equity—stock warrants Fair value adjustment Gain on disposition of assets Gain on early extinguishment Gain on troubled debt restructuring Interest expense Interest payable Interest receivable Interest revenue Inventory Investment in common stock Investment in convertible bonds Investment in stock warrants Land Loss on early extinguishment Loss on sale of investment Machinery Notes payable Notes receivable Premium on bond investment Premium on bonds payable Retained earnings Unrealized holding gain Unrealized holding loss 2. Prepare the journal entries for the June 30, 2020, interest payment by both Gless and Century assuming both use the straight-line method. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet A. Record the interest payment by Gless. B. Record the receipt of interest by Century 3. On July 1, 2021, when Gless’s common stock had a market price of $33 per share, Century converted the bonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (book value method). (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet A. Record the entry for Gless regarding the conversion of the bonds. B. Record the entry for Century regarding the conversion of the bonds.