On January 1, 2014, ABC Incorporated Issued $10,000,000 Face Amount

Essay

On January 1, 2014, ABC Incorporated issued $10,000,000 face amount of 8%, 10 year, subordinate convertible debentures at face value in a private placement.The debentures pay interest annually, in cash, on 31 December.The bonds were issued for $12 million, and that the market rate was 6%:
Assume that on January 1st, 2015, the bonds were retired for $12.5 million.Valuation models indicate that $500,000 of the proceeds is attributable to the equity portion, while the balance is attributable to the bonds.Prepare the required journal entry.