prepare an interest and armortization schedule for the first five interest period.

prepare entries in journal form to record the sale of the bonds, the first two interest payments, the bond retirement and the bind conversion

Interest and Amortization of a Bond Discount, Bond Retirement, and Bond Conversion Lo3 When Merrill Manufacturing Company was expanding its metal window division, it did 105 not have enough capital to finance the expansion. So, management sought and received 507 approval from the board of directors to issue bonds. The company plained to issue $5,000,000 of 8 percent, five-year bonds in 204. Interest would be paid on June 30 and December 31 of each year. The bonds would be callable at 104 , and each $1,000 bond would be convertible into 30 shares of $10 par value common stock. On January 1, 20x4, the bonds were sold at 96 because the market rate of interest for similar investments was 9 percent. The company decided to amortize the bond discount by using the effective interest method. On July 1, 20x6, management called and retired half the bonds, and investors converted the other half into common stock