Computer Diagnostics Company issued $700.000 of 8 1/2% bonds payable on July 31, 20X3, at a price of 98 1/2. 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 July 31, 20X9, bondholders exercised their right to convert the bonds into common stock. Recording retirement of bonds payable (Obj. 3) Recording conversion of bonds payable (Obj. 4) 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 July 31, 20X9. Computer Diagnostics uses the straight-line method to amortize bond pre- mium and discount. 3. All amortization has been recorded properly. Journalize the conversion transaction at July 31, 20X9.