Current Attempt in Progress

On July $1,2024,$ when its $$1$ par value common stock was selling for $$66$ per share, Novak Corp. issued

$$24,500,000$ of $6\%$ convertible debentures due in $10$ years. The conversion option allowed the holder of each

$$1,000$ bond to convert the bond into $10$ shares of the corporation's common stock. The debentures were

issued for $$25,970,000.$ The corporation believes the difference between the par value and the amount paid is

attributable to the conversion feature. On January $1,2025,$ the corporation's common stock was split $2$ for $1,$

and the conversion rate for the bonds was adjusted accordingly. On January $1,2026,$ when the corporation's

$$0\mathrm{.}50$ par value common stock was selling for $$38$ per share, holders of $9,800$ of the convertible debentures

exercised their conversion options. The corporation uses the straight$-$line method for amortizing any bond

discounts or premiums.

$($a$)$ Prepare in general journal form the entry to record the original issuance of the convertible debentures.

$($Credit account titles are automatically indented when amount is entered. Do not indent manually. If no

entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. List all debit

entries before credit entries.$)$

Account Titles and Explanation

Debit

Credit

$[$

$($b$)$ Prepare in general journal form the entry to record the exercise of the conversion option, using the book

value method. $($Credit account titles are automatically indented when amount is entered. Do not indent

manually. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts.

List all debit entries before credit entries.$)$

Account Titles and Explanation

Debit

Credit