When convertible bonds are issued,

Question

Quizplus · Accepted Answer

When convertible bonds are issued, the difference between the market price of the bond and its face amount is recorded as either a premium (if the market price is higher) or a discount (if the market price is lower). This is because the market price reflects the market's perception of the bond's value, which may be higher or lower than the face amount. The face amount of the bond is still debited to Cash, but the premium or discount is also recorded as a separate account.

When Convertible Bonds Are Issued