On January 1, 2010, Aguilar Products issued $24, 000 of ten-year bonds at 98.These bonds were each convertible into ten shares of $100 par common stock.On January 1, 2017, Lee converted two-thirds of these bonds when the common stock was selling at $130 a share.What would be the loss on bond conversion? $\begin{array}{llll}
& \text {Book Value Method}& \text {Market Value Method}\
\text { I. } & \$ 4,896 & \$ 0 \
\text { II. } & \$ 5,088 & \$ 0 \
\text { III. } & \$ 0& \$ 4,896 \
\text { IV. } & \$0 & \$ 5,088
\end{array}$

Question

On January 1, 2010, Aguilar Products issued $24, 000 of ten-year bonds at 98.These bonds were each convertible into ten shares of $100 par common stock.On January 1, 2017, Lee converted two-thirds of these bonds when the common stock was selling at $130 a share.What would be the loss on bond conversion? $\begin{array}{llll}
& \text {Book Value Method}& \text {Market Value Method}\
\text { I. } & \$ 4,896 & \$  0 \
\text { II. } & \$ 5,088 & \$  0 \
\text { III. } & \$ 0&  \$ 4,896 \
\text { IV. } & \$0 &  \$ 5,088
\end{array}$

Quizplus · Accepted Answer

The correct answer is A because the book value method results in a loss of $4,896, while the market value method results in no loss.

On January 1, 2010, Aguilar Products Issued $24, 000 of Ten-Year