Hersch Bonding Company issued \(\$ 400,000\) of \(81 / 2\)-percent bonds payable on July 1, 19X4, at a price of \(981 / 2\). After five years the bonds may be converted into the company's common stock. Each \(\$ 1,000\) face amount of bonds is convertible into 40 shares of \(\$ 20\) par stock. The bonds' term to maturity is 15 years. On December 31, 19X9, bondholders exercised their right to convert the bonds into common stock.
\section*{Required}
1. What would cause the bondholders to convert their bonds into common stock?
2. Without making journal entries, compute the carrying amount of the bonds payable at December 31, 19X9. Hersch Bonding Company uses the straight-line method to amortize bond premium and discount.
3. All amortization has been recorded properly. Journalize the conversion transaction at December \(31,19 \mathrm{X} 9\).