Assignment Problem: On January 1, 2018, Tracy Technology, Incorporated issued $840,000 of $1,000 par value, 5%, 6-year bonds. Interest is payable semiannually each January 1 and July 1 with the first interest payment due at the end of the period on July 1, 20182018. The market rate of interest for similar non-convertible bonds on the date of the bond issue was 8%. However, because these bonds are convertible, the effective rate is 6%. Each bond is convertible into 90 shares of Tracy Technology's $2 par value common stock. Assume there is no beneficial conversion option.
Requirements:
Q1. Calculate the Issued price of the debt?
Q2. Prepare the amortization table for the bond issue through 01/01/2021 using the effective interest rate of method of amortization.
Q3. Prepare journal entry for the bond issuance.
Q4. Prepare journal entry for first interest payment.
Q5. Journal entry to record the bond conversion on 01/01/2021.
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