On January 1, 2018, Virginia Beach Industries issued $400,000 of 9%, 10-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Beach's no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at a price to yield a market (effective) rate of 10%. Beach prepares its financial statements using IFRS.
Required:
1. Prepare the journal entry for the issuance of the bonds by Beach. Show calculations.
2. Prepare the journal entry to record interest on June 30, 2018. (the first interest payment) assuming Beach records interest at the effective rate. Show calculations.
3. Prepare the journal entry to record interest on December 31, 2018. (the second interest payment). Show calculations.
4. If Beach follows U. S. GAAP, how would the bonds be recorded differently? Show the journal entry.

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The Answer of On January 1, 2018, Virginia Beach Industries issued $400,000 of 9%, 10-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Beach's no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at a price to yield a market (effective) rate of 10%. Beach prepares its financial statements using IFRS.
Required:
1. Prepare the journal entry for the issuance of the bonds by Beach. Show calculations.
2. Prepare the journal entry to record interest on June 30, 2018. (the first interest payment) assuming Beach records interest at the effective rate. Show calculations.
3. Prepare the journal entry to record interest on December 31, 2018. (the second interest payment). Show calculations.
4. If Beach follows U. S. GAAP, how would the bonds be recorded differently? Show the journal entry.

On January 1, 2018, Virginia Beach Industries Issued $400,000 of 9