On January 1, 2012, when its $30 par-value common stock was selling for $80 per share, Gierach Corporation issued $10 million of 4% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five shares of the company’s $30 par-value common stock. Cash settlement upon conversion is not permitted. The debentures were issued for $10 million. Without the conversion feature, the bonds would have been issued for $8.5 million. On January 1, 2017, the company’s $30 par-value common stock was split three for one. On January 1, 2018, when the company’s $10 par-value common stock was selling for $90 per share, holders of 40% of the convertible debentures exercised their conversion options.

Required:

Following U. S. GAAP, prepare a journal entry to record the original issuance of the convertible debentures.
How much interest expense would the company recognize on the convertible debentures in 2015?
Prepare a journal entry to record the exercise of the conversion option using the book value method.
Prepare the entry to record the exercise of the conversion option using the market-value method.

Flounder supply company, a newly formed corporation, incurred the following expenditures related to land, to buildings, and to machinery and equipment. abstract company’s fee for title search $1,066 architect’s fees 6,499 cash paid for land and dilapidated building thereon 178,350 removal of old building $41,000 less: salvage 11,275 29,725 interest on short-term loans during construction 15,170 excavation before construction for basement 38,950 machinery purchased (subject to 2% cash discount, which was not taken) 112,750 freight on machinery purchased 2,747 storage charges on machinery, necessitated by noncompletion of building when machinery was delivered 4,469 new building constructed (building construction took 6 months from date of purchase of land and old building) 994,250 assessment by city for drainage project 3,280 hauling charges for delivery of machinery from storage to new building 1,271 installation of machinery 4,100 trees, shrubs, and other landscaping after completion of building (permanent in nature) 11,070 instructions determine the amounts that should be debited to land, to buildings,and to machinery and equipment. assume the benefits of capitalizing interest during constructionexceed the cost of implementation. indicate how any costs notdebited to these accounts should be recorded.