On July 31, 2014, Wylie Corp. had outstanding 10%, $1,500,000 face amount, conve

Question

On July 31, 2014, Wylie Corp. had outstanding 10%, $1,500,000 face amount, convertible bonds maturing on July 31, 2024. Interest is payable January 31 and July 31. On July 31, 2014, all the bonds were converted into 50,000 shares of $10 par value common stock. On the date of conversion:

Unamortized bond premium was $40,000.

Each bond had a market value of $1,050.

Each share of stock had a market price of $32.

Using the book value method, how much of a gain or loss should be recognized?

$0

$20,000

$40,000

$60,000

$0

$20,000

$40,000

$60,000

Explanation / Answer

Answer D is Correct :$ 60,000

=50000*32-1,500,000-40000= $ 60,0000

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