On on January one, year 1, acorn Financial Corp issued 825 convertible bonds. Each $1,000 face value bond is convertible into 5 shares of common stock. The bonds have a 10-year term to maturity and pay interest semi-annually. Acorns common stock has a par value of $20 per share. The convertible bonds were sold for $875,500. Bond issue cost of $50,000 will be subtracted from the bond sale proceeds to be received by acorn. The bonds were sold to yield a market interest rate of 3%. Acorn will use the effective interest method to amortize the bond discount or premium. Round all amounts to the nearest dollar.

Required:

Record record the journal entry for the issuance of the convertible bonds on January one year one.

Record the record the journal entries on June 30th year one to recognize interest expense in the amortization of the bond issue cost for the first 6 months of year one.