I listed the solution below. I am confused on why we divide $20,800 by 2 in the calculations below, and why we also divide $10,400 by 52 and multiply it by 10.

Dahl Co. issued $5,000,000 of 12%, 5-year convertible bonds on December 1, 2006 for $5,020,800 plus accrued interest. The bonds were dated April 1, 2006 with interest payable April 1 and October 1. Bond premium is amortized each interest period on a straight-line basis. Dahl Co. has a fiscal year end of September 30.

On October 1, 2007, $2,500,000 of these bonds were converted into 35,000 shares of $15 par common stock. Accrued interest was paid in cash at the time of conversion.

Instructions

Prepare the entry to record the conversion on October 1, 2007. Assume that the entry to record amortization of the bond premium and interest payment has been made.

(DR) Bonds Payable ............................................................................. 2,500,000 (DR) Premium on Bonds Payable ......................................................... 8,400 (CR) Common Stock (35,000 $15) ......................................... 525,000 (CR) Paid-in Capital in Excess of Par ........................................ 1,983,400

Calculations: Premium related to 1/2 of the bonds $10,400 ($20,800 2) Less premium amortized 2,000 [($10,400 52) 10] Premium remaining $ 8,400