Fair market values of the common stock were as follows: January 1, $20; April 1, $30; and May 1, $25. The bond conversion expense would be recorded at
A) $60,000.
B) $75,000.
C) $90,000.
D) $105,000.

Question

Quizplus · Accepted Answer

The bond conversion expense is calculated based on the fair market value of the common stock at the time of conversion. Since the conversion date is not specified, we assume the most recent value before conversion, which is $25 on May 1. If, for example, 3,000 shares were issued upon conversion, the expense would be 3,000 shares * $25 = $75,000.

Fair Market Values of the Common Stock Were as Follows