On April 1 2005 Rowe Tool Company authorized the sale

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On April 1, 2005, Rowe Tool Company authorized the sale of $5,000,000 of 6% convertible
bonds with interest payment dates of April 1 and October 1. The bonds were sold on July 1,
2005, and mature on April 1, 2025. The bond discount totaled $398,200. The bond contract
entitles the bondholders to receive 20 shares of $1 par value common stock in exchange for
each $1,000 bond. On April 1, 2015, the holders of bonds with total face value of $700,000
exercised their conversion feature. On July 1, 2015, Rowe Tool Company reacquired bonds,
face value $600,000, on the open market. The balances in the equity accounts as of December
31, 2014, were as follows: Common stock, $1 par, authorized 3 million shares, issued
andOutstanding, 300,000 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . $
300,000Paid-in capital in excess of par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.6,400,000Market values of the common stock and bonds were as follows:Instructions:Prepare
journal entries on the issuer's books for each of the following transactions. (Use the straight-line
amortization method for the bond discount.)1. Sale of the bonds on July 1, 2005.2. Interest
payment on October 1, 2005.3. Interest accrual on December 31, 2005, including bond discount
amortization for the six months since the bond issuance.4. Conversion of bonds on April 1,
2015. (Assume that interest and discount amortization is correctly shown as of April 1, 2015. No
gain or loss on conversion is recognized.)5. Reacquisition and retirement of bonds on July 1,
2015. (Assume that interest and discount amortization is correctly reported as of July 1,
2015.)View Solution:
On April 1 2005 Rowe Tool Company authorized the sale

ANSWER
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