On January 1 of Year 1, when its $30 par value common stock was selling for $80 per share, Ancil Corporation issued $5,000,000 of 4% convertible bonds due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation's $30 par value common stock. The bonds were issued for $5,500,000. The present value of the bond payments at the time of issuance was $4,250,000, and the corporation believes that the difference between the present value and the amount paid is attributable to the conversion feature. Two years later on January 1 of Year 3, when the corporation's common stock was selling for $90 per share, holders of 40% of the convertible bonds exercised their conversion option. The corporation uses the straight-line interest method for amortizing any bond discount or premium. Required Provide the entry to record the original issuance of convertible bonds on January 1 of Year 1. Provide the entry to record the exercise of the conversion option, using the book value method, on January 1 of Year 3.