1. On February 1, 2016, Ellison Co. issued eight-year bonds with a face value of $10,000,000 and a stated interest rate of 8%, payable semiannually on July 1 and January The bonds were sold to yield 10%.

a) The issue price of the bonds is

b) Record the journal entries for February 2016 at issuance and July 1

2. Using the information above, assume that the bonds issued by Ellison Co. are convertible with each $1,000 convertible into 25 shares of common stock. Assume that Ellison converts $4,000,000 of bonds on July 1, 2018 into common stock. Prepare the following entries:

a. Entry at February 1, 2016 for issuance of the convertible bonds

b. Entry at July 1, 2018 for the conversion of $4,000,000 of bonds.