Mountaineer Corp. issued $ 1,000,000, 8 percent convertible bonds on January 1, 2019 to yield 10 percent. The fifteen year bonds pay interest semiannually on June 30 and December 31 and interest is amortized using the effective interest method. Also, the bonds are callable at 104 any time after the second payment. Mountaineer prepares audited financial statements every December 31. Answer all the below questions. Justify your answers by showing ALL calculations.

(a) What were the proceeds of the issue on January 1, 2019?

(b) Ignoring taxes, how much and in what direction is income for fiscal 2019 affected by this use of debt financing?

(c) Prepare the long-term debt section of the December 31, 2019 balance sheet (show how ALL the accounts would appear).

(d) On January 1, 2020 half the bonds convert and each bond is converted into 25 shares of the companys $10 par common stock when the market price is $75 per share. The company uses the book value method. Record this entry ignoring any income tax effects (show calculations for your accounts).