Fogel Co.has $2,500,000 of 8% convertible bonds outstanding.Each $1,000 bond is convertible into 30 shares of $30 par value ordinary shares.The bonds pay interest on January 31 and July 31.On July 31, 2016, the holders of $800,000 bonds exercised the conversion privilege.On that date the market price of the bonds was 105 and the market price of the ordinary shares was $36.The total unamortized bond premium at the date of conversion was $175,000.Fogel should record, as a result of this conversion, a

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The conversion of bonds to shares involves removing the bond liability and recognizing the equity. The bonds converted are $800,000, which is 800 bonds. Each bond converts into 30 shares, so 800 bonds convert into 24,000 shares. The par value of these shares is $30, so the total par value is $720,000. The book value of the bonds converted is $800,000 plus the proportionate unamortized premium ($175,000 * $800,000 / $2,500,000 = $56,000), totaling $856,000. The difference between the book value of the bonds and the par value of the shares is $856,000 - $720,000 = $136,000, which is credited to Share Premium-Ordinary.

Fogel CoHas $2,500,000 of 8% Convertible Bonds Outstanding