On January 1, 2012, Desert Windows issued $1,000,000 of 15-year, 12% convertible at 110. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into four shares of Desert Windows $5 after December 31, 2013.
On January 1, 2014, $400,000 of the is converted into , which is then selling at $300. An additional $400,000 of the is converted on May 31, 2014. The market price of the is then $310. Accrued interest at May 31 will be paid on the next interest date.
Bond premium is amortized on a straight-line basis.
Instructions
Make the necessary journal entries for:
(a) December 31, 2013.
(c) May 31, 2014.
(b) January 1, 2014.
(d) June 30, 2014.
Record the conversions using the book value method.
