# On January 1, 2014, Gottlieb Corporation issued $4,310,000 of 10-year, 9% convertible debentures... ## Question: On January 1, 2014, Gottlieb Corporation issued$4,310,000 of 10-year, 9% convertible debentures at 104. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into 9 shares of Gottlieb Corporation$103 par value common stock after December 31, 2015.

On January 1, 2016, $431,000 of debentures are converted into common stock, which is then selling at$115. An additional $431,000 of debentures are converted on March 31, 2016. The market price of the common stock is then$119. 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, 2015.

(b) January 1, 2016.

(c) March 31, 2016.

(d) June 30, 2016.

Record the conversions using the book value method.

## Debenture:

Debenture are the debt instrument issued to borrow funds for a particular period. It is a legally binding contract between the fund provider and company. Fund provider will receive periodic interest as a consideration for the fund provided by him to company.

Journal Entries

 No. Date Account Titles and explaination Debit Credit a. December 31, 2015 Interest on debenture a/c----------------------------Dr 193950 - - - To Cash a/c - 193950 - - (Being Interest paid to debenture holders) - - - - - - - - December 31, 2015 Premium on debenture a/c----------------------------Dr 17240 - - - To Profit and Loss a/c - 17240 - - (Being premium on debenture amortized) - - - - - - - b. January 1,2016 9% convertible debenture a/c--------------------------Dr 431000 - - - To Common Stock a/c - 399537 - - To Security Premium a/c - 31463 - - (Being debenture converted into common stock) - - - - - - - - January 1,2016 Premium on debenture a/c-----------------------------Dr 13792 - - - To Profit and loss a/c - 13792 - - (Being premium on debenture amortized in proportion of debenture converted ) - - - - - - - c. March 31, 2016 8% convertible debenture a/c--------------------------Dr 431000 - - - To Common Stock a/c - 399537 - - To Security Premium a/c - 31463 - - (Being debenture converted into common stock) - - - - - - - - March 31,2016 Premium on debenture a/c-----------------------------Dr 13792 - - - To Profit and loss a/c - 13792 - - (Being premium on debenture amortized in proportion of debenture converted ) - - - - - - - - June 30, 2016 Interest on debenture a/c---------------------------- Dr 164858 - - - To Cash a/c - 164858 - - (Being interest paid to debenture holder) - -