On January 1, 2012, Desert Windows Corporation issued $1,000,000 of 15-year, 12% convertible debentures at 110. Interest

Question:

On January 1, 2012, Desert Windows issued $1,000,000 of 15-year, 12% convertible at 110. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into four shares of Desert Windows $5 after December 31, 2013.
On January 1, 2014, $400,000 of the is converted into , which is then selling at $300. An additional $400,000 of the is converted on May 31, 2014. The market price of the is then $310. Accrued interest at May 31 will be paid on the next interest date.
Bond premium is amortized on a straight-line basis.

Instructions
Make the necessary journal entries for:
(a) December 31, 2013.
(c) May 31, 2014.
(b) January 1, 2014.
(d) June 30, 2014.
Record the conversions using the book value method.

Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... 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... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... 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,...