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. Ech $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 bonds were converted when the market value of Irvining Common stock was $20 per share. Under the book-value method, how would we journalize the bonds conversion:

Please show me the journal entry for the converstion of the 300 bonds. Thank you

Explanation / Answer

Accounts Title Dr Cr Bonds Payable (300*$1000) $300,000 Contributed Capital-Common stock $18,000 Discount on Bonds Payable (30000/500000*300000) 18000 Common stock $300,000 (being bonds coverted into common stock) If any doubt please comment

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