Mesa Machinery Corporation issued 75 12- year, 12% convertible bonds at par. Each bond had a par

Question:

Mesa Machinery issued 75 12- year, 12% convertible bonds at par. Each bond had a of $ 1,000 and pays interest annually on December 31. Because the bonds were issued at par, the yield on the bond is also equal to 12%. Each $ 1,000 bond converts into 25 shares of $ 1 at the option of the bondholder beginning two years after the date of issue. Bond issue costs are $ 480. The market price of the on the conversion date was equal to $ 60 per share. Any discount is amortized using the straight- line method.
Required
a. Prepare the journal entry to record the bond issuance.
b. Prepare the journal entries to record the interest payment for the first three years.
c. Prepare the journal entry to record the amortization of the bond issue costs.
d. Prepare the entry to record the bond conversion, assuming that all bonds convert at the end of the third year. Common Stock
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