On January $1,2024,$ when its $$30$ par value common stock was selling for $$80$ per share, Swifty Corp. issued $$10,300,000$ of $8\%$ convertible debentures due in $20$ years. The conversion option allowed the holder of each $$1,000$ bond to convert the bond into five shares of the corporation's common stock. The debentures were issued for $$11,124,000.$ The present value of the bond payments at the time of issuance was $$8,755,000,$ and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January $1,2025,$ the corporation's $$30$ par value common stock was split $2$ for $1,$ and the conversion rate for the bonds was adjusted accordingly. On January $1,2026,$ when the corporation's $$15$ par value common stock was selling for $$135$ per share, holders of $30\%$ of the convertible debentures exercised their conversion options. The corporation uses the straight$-$line method for amortizing any bond discounts or premiums.

$($a$)$ Prepare the journal entry to record the original issuance of the convertible debentures. $($List debit entry before credit entry. Credit $.$ account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts.$)$

Account Titles and Explanation

Debit

Credit

Bonds Payable

Premium on Bonds Payable

$($b$)$ Prepare the journal entry to record the exercise of the conversion option, using the book value method. $($List all debit entries before

$($b$)$ Prepare the journal entry to record the exercise of the conversion option, using the book value method. $($List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts.$)$

Account Titles and Explanation

Debit

Credit

Bonds Payable

$2000000$

Premium on Bonds Payable

Common Stock

Paid$-$in Capital in Excess of Par $-$ Common Stock

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List of Accounts

Attempts: $1$ of $3$ used