Family Food Industries

Family Food Industries reported the following at September 30:

Long-term liabilities:

Convertible bonds payable $400,000

Less: Discount on bonds payable (12,000) $388,000

Requirements:

1. Record retirement of half of the bonds on October 1 at the call price of 101.

2. Imagine that the bonds had not been retired. What would cause the bondholders to convert their bonds into stock?

Journal

Date Accounts and Explanations Post Ref. Debit Credit

Oct 1

Computations:

Maturity value of bonds being retired

Less: Discount on bonds payable

Carrying value of bonds payable

Less: Market price

Loss on retirement of bonds payable