On April 1, 2003, Rowe Tool Company authorized the sale of $5,000,000 of 6% convertible bonds with

Question:

On April 1, 2003, Rowe Tool Company authorized the sale of $5,000,000 of 6% convertible bonds with interest payment dates of April 1 and October 1. The bonds were sold on July 1, 2003, and mature on April 1, 2023. The bond discount totaled $398,200.
The bond contract entitles the bondholders to receive 20 shares of $1 in exchange for each $1,000 bond. On April 1, 2013, the holders of bonds with total of $700,000 exercised their conversion feature. On July 1, 2013, Rowe Tool Company reacquired bonds, $600,000, on the open market. The balances in the equity accounts as of December 31, 2012, were Common stock, $1 par, authorized 3 million shares, issued and outstanding, 300,000 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300,000
Paid-in capital in excess of par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400,000
Market values of the and bonds were as follows:
Date _______________________Bonds (per $1,000) _________Common Stock (per share)
April 1, 2013 . . . . . . . . . . . . . . . . . . $1,120 ................................................$52
July 1, 2013 . . . . . . . . . . . . . . . . . . . ..1,200..................................................61
Instructions:
Prepare journal entries on the issuer's books for each of the following transactions. (Use the straight-line amortization method for the bond discount.)
1. Sale of the bonds on July 1, 2003.
2. Interest payment on October 1, 2003.
3. Interest accrual on December 31, 2003, including bond discount amortization for the six months since the bond issuance.
4. Conversion of bonds on April 1, 2013. (Assume that interest and discount amortization are correctly shown as of April 1, 2013. No gain or loss on conversion is recognized.)
5. Reacquisition and retirement of bonds on July 1, 2013. (Assume that interest and discount amortization are correctly reported as of July 1, 2013.)
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...