On July 1, 2017, Crane Ltd. issued 1,000 convertible, five-year, $1,000 bonds. E

Question

On July 1, 2017, Crane Ltd. issued 1,000 convertible, five-year, $1,000 bonds. Each bond is convertible into 20 common shares at the bondholder's option. On the date of conversion rights were valued at $53,000

On July 1, 2020, the bonds had a carrying value on Crane's books of $969,000, and the fair market value of the bonds without the convertible option was $977,000.

assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2020

prepare the journal entry to record the conversion

Explanation / Answer

Date Account titles & Explanation Debit Credit July 1, 2020 Bonds Payables   A/c $969,000 Contributed Surplus - Conversion Rights $53,000           To Common Shares A/c $1,022,000 (Being Bond Holders convert their Bonds to common stock Fully)

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