Wedge Corporation issued $$1,500,000$ of $10\%$ convertible bonds for $$1,620,000$ on March $1,2019.$ The bonds are dated March $1,2019,$ pay interest semiannually on August $31$ and February $28,$ and the premium is amortized using the straight$-$line method. The bonds are due on February $28,2029,$ and each $$1,000$ bond is convertible into $25$ shares of Wedge$$s $$10$ par common stock. On March $1,2021,$ when the shares were selling for $$28$ per share, $$300,000$ of bonds were converted. On September $1,2023,$ when the shares were selling for $$30$ per share, the remainder of the bonds were converted.

Required:

$1.$ Prepare the journal entries to record each bond conversion using $($a$)$ the book value method and $($b$)$ the market value method.

$2.$ Next Level If the company were required under GAAP to assign a value to the conversion feature, explain how the valuation would be determined $($no calculations are required$).$

$3.$ Compute the company$$s debt$-$to$-$equity ratio $($total liabilities divided by total shareholders$$ equity, as mentioned in Chapter $6)$ under each alternative. Assume the company$$s other liabilities are $$3$ million, and that shareholders$$ equity before conversion is $$3\mathrm{.}5$ million. Compute the ratio right before and right after the March $1,2021,$ transaction under each alternative.

$4.$ Assume the company uses IFRS and issued the bonds for $$1,620,000$ on March $1,2019.$ On this date, it determined that the fair value of each bond was $$1,040$ and the fair value of the conversion option was $$40$ per bond. Prepare the journal entry to record the issuance of the bonds.