Problem 7-6 (IAA) Karen Company showed the following accounts on December 31, 2020 5,000,000 250,000 Bonds payable Premium on bonda payable Share capital - 250,000 shares authorized and 200,000 shares issued, P50 par Share premium - issuance Share premium - conversion privilege Retained earnings 10,000,000 2,000,000 500,000 2,500,000 The bonds are convertible into 10 shares of capital for every P1,000 bond. On December 31, 2020, the entire bond issue was converted and on this date, the market value of the share is 120 and the market value of the bonds is 103. The entity paid P200,000 as a result of the bond conversion. Required: Prepare journal entries for the conversion of the bonds on December 31, 2020. value. Problem 7-7 KIAA) On January 1, 2020, Andrea Company issued 4,000 convertible bonds with P1,000 face amount per bond. The bonds have a three-year life and are issued at 105 or a total proceeds of P4,200,000 Interest is payable annually at 6% every December 31. Each bond is convertible into 20 ordinary shares with P50 par When the bonds are issued, the market rate of interest for similar bonds without conversion option is 8%. The PV of 1 at 8% for three periods is .79, and the PV of an ordinary annuity of 1 at 8% for three periods is 2.58. Required: 1. Prepare journal entry to record the original issuance of the convertible bonds. 2. Prepare journal entry to record the full payment of the convertible bonds at maturity on January 1, 2023