1. On January 1, 2010 Horrible Inc. issued $1,000,000 of 8% convertible debentures. The bonds pay interest annually on December 31st for 10 years. The market rate of interest for similar debt is 10%. The bonds are convertible at the option of the holder into common stock at a conversion ratio of 5 shares per $1,000 bond. The common stock has a $1 par value. On January 1, 2011 one half of the holders of the convertible debentures exercise their conversion option. Prepare the journal entry by Horrible Inc. at the date of the conversion. 2. Horrible Inc. issues 10,000, $100 face value, 8% debt with detachable warrants that permit the holder to purchase one share of stock for $18 per share. The bonds were issued at 102. Immediately after issue the bonds were selling for 98 without the warrants and the warrants have a market value of $8. Prepare the initial entry to record the issuance using the proportional method: 3. DCL Industries purchased a supply of mechanical components from E Corporation on November 1, 2009. In payment for the $48,000 purchase, DCL issued a 1-year installment note to be paid in equal monthly payments at the end of each month. The payments include interest at the rate of 12%. The cost of the inventory to E Corporation was $43,000. Borrower: Prepare the journal entry for DCL's (Borrower) purchase of the components on November 1, 2009. Prepare the journal entry for the first installment payment on November 30, 2009 by DCL (Borrower). Prepare the journal entry for the second installment payment on December 31, 2009 by DCL (Borrower). Lender: Prepare the journal entry for E Corporation?s (Lender) sale of the components on November 1, 2009. Prepare the journal entry for the first installment payment on November 30, 2009 by E Corporation (Lender).

1. (3 pts) On January 1, 2010 Horrible Inc. issued $1,000,000 of 8% convertible debentures. The bonds pay interest annually on December 31st for 10 years. The market rate of interest for similar debt is 10%. The bonds are convertible at the option of the holder into common stock at a conversion ratio of 5 shares per $1,000 bond. The common stock has a $1 par value. On January 1, 2011 one half of the holders of the convertible debentures exercise their conversion option. Prepare the journal entry by Horrible Inc. at the date of the conversion. 2. (3 pts) Horrible Inc. issues 10,000, $100 face value, 8% debt with detachable warrants that permit the holder to purchase one share of stock for $18 per share. The bonds were issued at 102. Immediately after issue the bonds were selling for 98 without the warrants and the warrants have a market value of $8. Prepare the initial entry to record the issuance using the proportional method: 5. (4 pts) DCL Industries purchased a supply of mechanical components from E Corporation on November 1, 2009. In payment for the $48,000 purchase, DCL issued a 1-year installment note to be paid in equal monthly payments at the end of each month. The payments include interest at the rate of 12%. The cost of the inventory to E Corporation was $43,000. Borrower: Prepare the journal entry for DCL's (Borrower) purchase of the components on November 1, 2009. Prepare the journal entry for the first installment payment on November 30, 2009 by DCL (Borrower). Prepare the journal entry for the second installment payment on December 31, 2009 by DCL (Borrower). Lender: Prepare the journal entry for E Corporation's (Lender) sale of the components on November 1, 2009. Prepare the journal entry for the first installment payment on November 30, 2009 by E Corporation (Lender). Prepare the journal entry for the second installment payment on December 31, 2009 by E Corporation (Lender)