Needing help with this Intermediate Accounting II Question

EX.14-17

On January 1, 2015, when its $30 par value common stock was selling for $80 per share, a corporation issued $10 million of 10% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert it into six shares of the corporation's $30 par value common stock. The debentures were issued for $11 million. At the time of issuance, the present value of the bond payments was $8.5 million, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2016, the corporation's $30 par value common stock was split 3 for 1. On January 1, 2017, when the corporation's $10 par value common stock was selling for $90 per share, holders of 40% of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.

Required:

1.	Prepare the journal entry to record the original issuance of the convertible debentures.
2.	Prepare the journal entry to record the exercise of the conversion option, using the book value method.

CHART OF ACCOUNTSCorporationGeneral Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation
	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
255	Bonds Payable
256	Premium on Bonds Payable
261	Income Taxes Payable

	EQUITY
311	Common Stock
315	Additional Paid-In Capital
331	Retained Earnings
	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

General Journal

journal entry to record the original issuance of the convertible debentures on January 1, 2015.

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3

journal entry to record the exercise of the conversion option, using the book value method on January 1, 2017.

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4