Problem 3. Volker Inc. issued $2,500,000 of convertible 10 -year bonds on July 1, 2014. The bonds provide for 12% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $54,000 , which is being amortized monthly on a straight-line basis. shares of Volker The bonds are convertible after one year into 8 Inc.'s $100 par value common stock for each $1,000 of bonds. of bonds were turned in for conversion into common On August 1, 2015, $250,000 stock. Interest has been accrued monthly and paid as due. At the time of conversion any accrued interest on bonds being converted is paid in cash. Note: Due to rounding and significant digits, there may be slight number differences. Instructions: Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates: (Round to the nearest dollar.) (a) August 1, 2015. (Assume the book value method is used.) Aug 1, 15 250,000 Bond Payable Discount on Bond Payable Common Stock Paid in capital 4,815 200,000 45,185 Enter entry memorandum. Area for calculations as desired. Area for calculations as desired. Aug 1, 15 2,500 Interest Payable Cash Enter entry memorandum. 2,500t (b) August 31, 2015. Aug 31, 15 405 Interest Expense Discount on bond payable Enter entry memorandum. 405 Area for calculations as desired. Aug 31, 15 22,500 Interest Expense Interest payable Enter entry memorandum. 22,500 (c) December 31, 2015, including closing entries for end-of-year. Dec 31, 15 292,675 Income summary Interest Expense Enter entry memorandum. 292,675 Schedule 1 - Monthly Amortization Schedule Unamortized discount on bonds payable: Amount to be amortized over 120 months Text title Text title Text title Text title Text title Text title Amount Formula Formula Formula Formula Formula Formula Schedule 2 Interest Expense Schedule Amortization of bond discount charged to bond interest expense in 2015 would be as follows: Text title Text title Formula Formula Total Formula Interest on Bonds: Text title Text title Text title Text title Interest for 2015 would be as follows: Text title Text title Formula Formula Formula Formula Formula Formula Formula Total Total interest Text title Text title Text title Formula Formula Formula