E16-6B (Conversion of Bonds) On January 1, 2012, Desert Windows Corporation issued $1,000,000 of 15-year, 12% convertible debentures at 110. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into four s

E16-6B (Conversion of Bonds) On January 1, 2012, Desert Windows Corporation issued $1,000,000 of 15-year, 12% convertible debentures at 110. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into four shares of Desert Windows Corporation $5 par value common stock after December 31, 2013.

On January 1, 2014, $400,000 of the debentures is converted into common stock, which is then selling at $300. An additional $400,000 of the debentures is converted on May 31, 2014. The market price of the common stock is then $310. Accrued interest at May 31 will be paid on the next interest date.

Bond premium is amortized on a straight-line basis.

Instructions

Make the necessary journal entries for:

(a) December 31, 2013.    (c) May 31, 2014.

(b) January 1, 2014.         (d) June 30, 2014.

Record the conversions using the book value method.