P16-2 (Entries for Conversion, Amortization, and Interest of Bonds)
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.
The bonds are convertible after one year into 8 shares of Volker Inc.’s $100 par value common stock for each $1,000 of bonds.
On August 1, 2015, $250,000 of bonds were turned in for conversion into common 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.
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.)
(b) August 31, 2015.
(c) December 31, 2015, including closing entries for end-of-year.