1. Scan House, Inc. contracted with Scholz Corporation for the construction of a custom- made deluxe sauna. The sauna was completed and ready for use on January 1, 2021. Scan House paid for the sauna by issuing a 35,000 note due in five years. Interest, specified at 2%, was payable annually on December 31 of each year. The cash market price of the sauna was unknown. It was determined by comparison with similar transactions for which 10% was a reasonable rate of interest. Required: 1. Prepare the journal entry on January 1, 2021, for Scan House's purchase of the sauna. 2. Prepare an amortization schedule for the five-year term of the note. 2. On January 1, 2021, Lynbrook Corporation issued $4 million of 7%, 15-year convertible bonds at 102. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of $1 par common stock. Scan House, Inc. purchased 20% of the issue as an investment. On July 1, 2021, Scan House converted all of its bonds into common stock of Lynbrook. The market price per share for Lynbrook was $32 at the time of the conversion. Both companies use the straight-line method for amortization. Required: 1. Prepare the journal entries for the issuance of the bonds on the issuer and the investor's books. 2. Prepare the journal entries for the conversion on the books of the issuer and the investor