On April 1, 2020, Dalton Ltd. issued a convertible $3,000,000, 25-year, 6% bond at 99. The bond is convertible at a rate of 10 common shares for each $1,000. Similar bonds trading on the market without this option carry an interest rate of 7%. Interest on the bond is paid semi-annually on April and October 1st each year, beginning in October 1, 2020. Dalton uses the effective interest method of amortizing discounts or premiums.

REQUIRED:

1. Prepare the journal entry to record the bond issuance using the residual value (incremental) method. Show all calculations.
2. Prepare the journal entry for the first interest payment on October 1, 2020.
3. Prepare the entry on Daltons books assuming that 60% of the bonds were converted immediately after the October 1, 2021 interest payment.
4. Prepare the adjusting entry for the interest accrual on December 31, 2021.
5. Prepare the journal entry for the interest payment on April 1, 2022
6. Prepare the entry on Daltons books on the maturity date of the bond.