On July 1, 2014, an interest payment date, $90,000 of Parks Co. bonds were converted into 1,800 shares of Parks Co. common stock each having a par value of $45 and a market value of $54. There is $3,600 unamortized discount on the bonds. Using the book value method, Parks would record

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Under the book value method, the book value of the bonds is transferred to the common stock and additional paid-in capital accounts. The book value of the bonds is their face value minus any unamortized discount. Here, the book value is $90,000 - $3,600 = $86,400. The common stock issued has a par value of $45 per share, so for 1,800 shares, the total par value is $45 * 1,800 = $81,000. The difference between the book value of the bonds and the par value of the stock is $86,400 - $81,000 = $5,400, which is recorded as an increase in paid-in capital in excess of par.

On July 1, 2014, an Interest Payment Date, $90,000 of Parks