Arbutus Inc.issued a 10-year bond on July 1,2016.The $30,000,000 par bond pays $900,000 of interest on December 31 and June 30.The company has a calendar year-end.
It is now February 2020.During the audit of the 2019 financial statements,it was discovered that the bond indenture allowed holders to convert the bonds to common shares.The terms of the conversion allow each $1,000 bond to be converted into 50 shares.Additional investigation concluded that the bond would have yielded 8%/a,had it not included the conversion option.
Required:
Record any adjusting journal entries required to correct Arbutus's accounts.The books for 2019 have not yet been closed.

Question

Quizplus · Accepted Answer

The Answer of Arbutus Inc.issued a 10-year bond on July 1,2016.The $30,000,000 par bond pays $900,000 of interest on December 31 and June 30.The company has a calendar year-end.
It is now February 2020.During the audit of the 2019 financial statements,it was discovered that the bond indenture allowed holders to convert the bonds to common shares.The terms of the conversion allow each $1,000 bond to be converted into 50 shares.Additional investigation concluded that the bond would have yielded 8%/a,had it not included the conversion option.
Required:
Record any adjusting journal entries required to correct Arbutus's accounts.The books for 2019 have not yet been closed.