Question

Archer Inc. issued $4,000,000 par value, 7% convertible bonds at 99 for cash. If the bonds had not included the conversion feature, they would have sold for 95. Prepare the journal entry to record the issuance of the bonds.

Answer 1

Answer:

                               Dr.             Cr.  

Cash                 4,000,000

Bond Payable                     4,000,000

Explanation:

Issuance of Bond will create an liability and cash is received against the bonds. So, Cash will be dibited and a payable account with title bond payable will be credited. These bonds are convertible and it can be converted it bond holder want to convert it into share then at that time another entry of share conversion will be recorded.