On January 1, 2013, Gless Textiles issued $26 million of 7%, 20-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Glesss no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 10% of the issue as an investment.

Required:

1.

Prepare the journal entries for the issuance of the bonds by Gless and the purchase of the bond investment by Century. (Enter your answers in whole dollars. If no entry is required for a particular event, select "No journal entry required" in the first account field.)

Event	General Journal	Debit	Credit
1	Cash
	Convertible bonds payable
	Premium on bonds payable
2	Investment in convertible bonds
	Premium on bond investment
	Cash

2.

Prepare the journal entries for the June 30, 2017, interest payment by both Gless and Century assuming both use the straight-line method. (Enter your answers in whole dollars. If no entry is required for a particular event, select "No journal entry required" in the first account field.)

Event	General Journal	Debit	Credit
1	Interest expense
	Premium on bonds payable
	Cash
2	Cash
	Premium on bond investment
	Interest revenue

3.

On July 1, 2018, when Glesss common stock had a market price of $33 per share, Century converted the bonds it held. Prepare the journal entries by both Gless and Century for the conversion of the bonds (book value method). (Enter your answers in whole dollars. If no entry is required for a particular event, select "No journal entry required" in the first account field.)

Event	General Journal	Debit	Credit
1	Convertible bonds payable
	Premium on bonds payable
	Common stock
2	Investment in common stock
	Investment in convertible bonds
	Premium on bond investment