On January 1, 2020, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into 8 shares of Gottlieb Corporation $100 par value common stock after December 31, 2021. On January 1, 2022, $400,000 of debentures are converted into common stock, which is then selling at $110. An additional $400,000 of debentures are converted on March 31, 2022. The market price of the common stock is then $115. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis. Make the necessary journal entries for: (a) December 31, 2021. (c) March 31, 2022. (b) January 1, 2022. (d) June 30, 2022

(a) December 31, 2021.

Bond Interest Expense                      156,000

Premium on Bonds Payable                4,000

($80,000 X 1/20)

Cash ($4,000,000 X 8% X 6/12)                              160,000

(b) January 1, 2022

Bonds Payable                               400,000

Premium on Bonds Payable                 6,400

Common Stock                                               320,000

[8 X $100 X ($400,000/$1,000)]

Paid-in Capital in Excess of Par                         86,400

Total premium

($4,000,000 X .02)                              $80,000

Premium amortized

($80,000 X 2/10)                                        16,000

Balance                                                     $64,000

Bonds converted

($400,000 ÷ $4,000,000)                           10%

Related premium

($64,000 X 10%)                                        6,400

(c) March 31, 2022

Bond Interest Expense                       7,800

Premium on Bonds Payable                200

($6,400 ÷ 8 years) X 3/12

Bond Interest Payable                                            8,000

($400,000 X 8% X 3/12)

Bonds Payable                                 400,000

Premium on Bonds Payable                   6,200

Common Stock                                                    320,000

Paid-in Capital in Excess of Par                              86,200

Premium as of January 1, 2022

for $400,000 of bonds                          $6,400

$6,400 ÷ 8 years remaining

x 3/12                                                               (200)

Premium as of March 31, 2022

for $400,000 of bonds                                 $6,200  

(d) June 30, 2022

Bond Interest Expense                    124,800

Premium on Bonds Payable              3,200

Bond Interest Payable                      8,000

($400,000 X 8% X 1/4)***

Cash                                                                        136,000*

[Premium to be amortized:

($80,000 X 80%) X 1/20 = $3,200, or

$51,200** ÷ 16 (remaining interest and

amortization periods) = $3,200]

***Total to be paid: ($3,200,000 X 8% ÷ 2) + $8,000 = $136,000

***Original premium           $80,000

2020 amortization                  (8,000)

2021 amortization                    (8,000)

Jan. 1, 2022 write-off           (6,400)

Mar. 31, 2022 amortization     (200)

Mar. 31, 2022 write-off           (6,200)

                                                $51,200

***Assumes interest accrued on March 31. If not, debit Bond Interest  

Expense for $132,800.

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