Carrington Industries converts $200,000 of par value bonds,with a carrying value of $100,000,into 50,000 shares of $1 par value common stock..How would the company record this transaction?
A)Debit Bonds Payable for $200,000 and credit Cash for $100,000.
B)Debit Bonds Payable for $200,000,credit Common Stock for $50,000,and credit Paid-In Capital in Excess of Par Value for $150,000.
C)Debit Bonds Payable for $200,000 and credit Common Stock for $200,000.
D)Debit Common Stock for $50,000,credit Paid-In Capital in Excess of Par Value for $150,000,and credit Bonds Payable for $200,000.
E)Debit Bonds Payable for $50,000 and credit Common Stock for $50,000.

Question

Quizplus · Accepted Answer

When bonds are converted into common stock, the company credits the Bonds Payable account for the par value of the bonds being converted (in this case, $200,000), and debits the account(s) affected by the conversion. In this case, the company would credit the Common Stock account for the par value of the stock being issued (in this case, $50,000) and credit the Paid-In Capital in Excess of Par Value account for the excess of the bonds' carrying value over the par value of the common stock being issued (in this case, $150,000).

Carrington Industries Converts $200,000 of Par Value Bonds,with a Carrying