If bonds with a face value of $200,000 are converted into common stock when the carrying value of the bonds is $155,000,the entry to record the conversion would include a debit to:
A)Bonds Payable for $155,000.
B)Bonds Payable for $200,000.
C)Discount on Bonds Payable for $45,000.
D)Cash for $45,000.

Question

Quizplus · Accepted Answer

When bonds are converted into common stock, the carrying value of the bonds is transferred to the common stock account. In this case, the carrying value of the bonds is $155,000, which is less than the face value of $200,000. Therefore, the entry to record the conversion would include a debit to Bonds Payable for the face value of $200,000. There is no need for a debit to Discount on Bonds Payable or Cash in this scenario.

If Bonds with a Face Value of $200,000 Are Converted