On January 1, 2020, Slug Corporation issued $6 million of 8%, 10-year convertible bonds at 102. The

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Question:

On January 1, 2020, Slug Corporation issued $6 million of 8%, 10-year convertible bonds at 102. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of $1 par common stock. Fuzz Company purchased 20% of the issue as an investment. On July 1, 2024, Fuzz converted all of its bonds into common stock of Slug. The market price per share for Slug was $32 at the time of the conversion. Both companies use the straight-line method for amortization.

Required:

1. Prepare journal entries for the issuance of the bonds on the issuer.

2. Prepare the journal entries for the conversion on the books of the issuer.