On January 1, 2016, Pandora Fleece Company issued $1,000,000 10-year 10% redeemable convertible bonds. The bonds have a yield rate of 8%. Interest is paid annually on December 31 and is accounted for under the effective-interest method. Each $1,000 bond is convertible at the holders request into 100 shares of the companys $1 par value common stock.

Required:

a.Compute the proceeds and prepare the journal entry to record the bond issuance.

b.Construct a bond amortization table for this problem for the first two years of the bonds life. (DO NOT do more than 2 years.)

c.Prepare the journal entry required on December 31, 2016.

d.On January 1, 2018, holders of $250,000 face value bonds opt to convert their bonds into shares of common stock. Show the journal entry required to effect this conversion.

e.Also on January 1, 2018, the company redeems $400,000 face value of the bonds at 105. Show the journal entry required to effect this redemption.