Sheridan Company issued 8800, 4-year convertible bonds of $2000 each for $4200000 at the beginning of 2018. The bonds have a stated rate of interest of 10% and interest is payable annually. Each bond can be convertible into 100 shares with a par value of $10. The market rate of similar nonconvertible debt is 11%. The fair value of the liability component using the with-and-without method is