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Freddy, Inc. had outstanding 10 percent, $1,000,000 face value, convertible bonds maturing on December 31, 2020. Interest is paid June 30 and December 31. After

Freddy, Inc. had outstanding 10 percent, $1,000,000 face value, convertible bonds maturing on December 31, 2020. Interest is paid June 30 and December 31. After interest expense, premium amortization and cash payments through June 30, 2017, have been recorded, the unamortized balance in the bond premium account was $20,000. On that date, all bonds were converted into 20,000 shares of $20 par common stock.

a.

Prepare the journal entry to record the conversion of the bonds for common stock.

b.

Note: interest expense, amortization of premium and cash payments have been recorded.

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