GK Chesterton Co. issued $5,000,000 of 7.5%, 5-year convertible bonds on December 1, 2019 for $5,025,480 plus accrued interest of $62,500 (credited to interest payable). The bonds were dated April 1, 2019 with interest payable on April 1 and October 1. Bond premium is amortized each interest period on a straight-line basis. Each $1,000 bond is convertible into 14 shares of $15 par value common stock.

On October 1, 2020, bonds with a face value of $2,500,000 were converted into common stock.

Instructions:

(a) Prepare the entry to record the interest payment on April 1, 2020. Assume that interest payable was credited when the bonds were issued (round to nearest dollar). Hint: You will need to amortize the premium over 52 months since the bonds were issued after the date of April 1, 2019.

(b) Prepare the entry to record the entries on October 1, 2020.

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