On January 1, 2011, WingZ N ThingZ, Inc., issued $1,200,000 bonds dated the same day. The bonds mature on January 1, 2015 and interest is paid semi-annually on June 30 and December 31. The fiscal year ends December 31 and the company uses ASPE for reporting purposes. Further, the company had decided to not record any portion of the bond issue to equity and that it would use the effective rate method to amortize any bond premium or discount.

Neither the coupon rate nor the effective rate is being given to you. However, you are told that the bonds were issued for $1,161,220 and the amortized balances of the bonds payable as at July 1, 2011 and January 1, 2012 were $1,165,281 and $1,169,545 respectively. And finally, you are also told that the cash payment made at each interest date (coupon amount) was $54,000.

Use this information to answer the following questions and prepare journal entries where asked for. HINT: It would be useful for you to construct a partial amortization table.

1] Determine the coupon rate of the bonds.

2] Determine the effective rate of the bonds.

3] Prepare the journal entry to record the interest payment on December 31, 2012.

Now assume that following the payment of the periods interest, the amortized balance of the bonds was $1,183,659 on June 30, 2013. Use this information to answer the next question.

4] The company converted 40% of the bonds by issuing 6,000 common shares. The shares of the company were being traded on that date at $85 each. Prepare the required journal entry, in proper format, to record this transaction.