On January 2, 2017, Zamarano, Inc. issued 5,000 10-year, 6%, $1,000 bonds at par. Interest is paid each December 31. Each bond is convertible into 25 shares of Zamarano $2 Par Value common stock after two years. The market value of the stock on the date of the issue was $45. On January 2, 2021, when the carrying value of the bonds was $4,570,301, all of the bondholders converted the bonds to stock. Zamarano reports under GAAP.
Required:
1. Prepare the journal entry to record the issuance of the bonds.
2. Recompute the interest rate of the bond issue.
3. Record the first interest payment.
4. Record the conversion of the bonds.

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The Answer of On January 2, 2017, Zamarano, Inc. issued 5,000 10-year, 6%, $1,000 bonds at par. Interest is paid each December 31. Each bond is convertible into 25 shares of Zamarano $2 Par Value common stock after two years. The market value of the stock on the date of the issue was $45. On January 2, 2021, when the carrying value of the bonds was $4,570,301, all of the bondholders converted the bonds to stock. Zamarano reports under GAAP.
Required:
1. Prepare the journal entry to record the issuance of the bonds.
2. Recompute the interest rate of the bond issue.
3. Record the first interest payment.
4. Record the conversion of the bonds.