Bonds payable with a conversion privilege are accounted for as
A)common stock only
B)debt and common stock
C)debt only
D)debt and additional paid-in capital

Question

Quizplus · Accepted Answer

Convertible bonds are initially recorded as debt only, because the conversion feature is not recognized separately in financial statements under most accounting standards. The conversion privilege allows bondholders to convert their bonds into a predetermined number of shares of common stock, but until conversion, the bonds are accounted for as a liability.

Bonds Payable with a Conversion Privilege Are Accounted for as