In January 20X6, Sterling issued $2,000,000 of 20-year, 7%, convertible bonds that pay interest annually on December 31. The bonds were issued when the market rate was 7.5%. Bond issuance costs were $231,000. 15 years after 20X6, the bonds can be converted to ordinary shares at the rate of four $100 bonds for two ordinary shares. The bonds sold for $2,204,771.

The sale of the bonds was recorded in Sterling's accounting records as follows:

DR Cash 2,204,771

CR Convertible bonds payable 2,204,771

DR Bond transaction expenses 231,000

CR Cash 231,000

Interest payments are due on December 31. Due to a computer problem, the December 31, 20X6, payments were not made.

Provide the journal entries for each of the above issues. Provide a bonds payable amortization table, a stock appreciation rights worksheet, a convertible bonds payable amortization table, and any other working papers necessary to support the journal entries.