Exhibit 14-9 Mayne, Inc.sold $500, 000 of its ten-year 8% bonds at 96 on January 1, 2009.Interest is paid each January 1 and July 1 and straight-line amortization is used.Each $1, 000 bond is convertible into 100 shares of $10 par common stock.One-half of the bonds were converted on January 1, 2014, when the market value of the stock was $14 per share.
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Refer to Exhibit 14-9.The entry to record the conversion using the market value method would include a

Question

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The market value method of accounting for the conversion of bonds into stock recognizes a loss if the market value of the stock issued is greater than the carrying amount of the bonds converted. In this case, the market value of the stock ($14 per share for 100 shares per bond for half of the $500,000 bonds) exceeds the book value of the bonds being converted, leading to a loss.