At the preceding year-end, Irvining Corp. issued 8%, $500,000 face amount conver

Question

At the preceding year-end, Irvining Corp. issued 8%, $500,000 face amount convertible bonds that mature in 10 years. Interest is payable at each subsequent year-end. Each $1,000 bond is convertible to 50 shares of Irvining common stock, which has a par value of $10 per share. The unamortized discount on the bonds 1 year after issuance was $30,000. On that date, 300 of the bonds were converted when the market value of Irvining common stock was $20 per share. Under the book-value method, Irvining should A. Recognize a gain of $18,000. B. Credit both common stock and additional paid-in capital for $150,000. C. Credit common stock for $150,000 and additional paid-in capital for $450,000. D. Credit common stock for $150,000 and additional paid-in capital for $132,000.

Explanation / Answer

C.Credit common stock for $150,000 and additional paid-in capital for $450,000.

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