PROBLEM 1 0-38 BOND ENTRIES-ISSUER On April 1. 1992, the MiromarTooI Company authorized the sale of $8,000,000 of 7%

convertible bonds with interest payment dates ofApril 1 and October 1 . The bonds were sold on July 1, 1992, and mature on April 1, 2012. The bond discount totaled

$426,600. The bond contract entitles the bondholders to receive 25 shares of $1 par value common stock in exchange for each $1,000 bond. On April 1, 2002, the holders of bonds with total face value of $1,000,000 exercised their conversion feature. On July 1, 2002, the MiromarTooI Company reacquired bonds, face value $500,000, on the open market. The balances in the equity accounts as of December 31, 2001, were:

Common stock, $1 par, authorized 3 million shares, issued and outstanding, 250,000 shares $ 250,000 Paid-in capital in excess of par 6,000,000 Market values of the common stock and bonds were as follow^s:

Bonds Common Stock Date (per $1,000) (per Share)

April 1, 2002 $1,220 $47 July 1, 2002 1,250 51 Instructions: Prepare journal entries on the issuer's books for each of the following transactions. G-fse the straight-line amortization method for the bond discount.)

1. Sale of the bonds on July 1 , 1992.

2. Interest payment on October 1, 1992.

3. Interest accrual on December 31, 1992, including bond discount amortization.

4. Conversion of bonds on April 1, 2002. (Assume that interest and discount amortization are correctly shown as ofApril 1, 2002. No gain or loss on conversion is recognized.)

5. Reacquisition and retirement of bonds on July 1 , 2002. (Assume that interest and discount amortization are correctly reported as ofJuly 1, 2002.)