A bond issue of $50,000 with a carrying value of $49,000 is converted into $10 par value common stock at the rate of fifty shares for each $1,000 bond.The entry to record the conversion of bonds would be:
A) Bonds Payable 50,000
Loss on Retirement of Bonds 1,000
Unamortized Bond Discount 1,000
Common Stock 50,000
B) Bonds Payable 50,000
Common Stock 25,000
Additional Paid-In Capital 25,000
C) Bonds Payable 50,000
Common Stock 25,000
Additional Paid-In Capital 24,000
Unamortized Bond Discount 1,000
D) Bonds Payable 49,000
Unamortized Bond Discount 1,000
Common Stock 25,000
Additional Paid-In Capital 25,000

Question

Quizplus · Accepted Answer

The bonds payable are debited for their face value of $50,000. The common stock is credited for the par value of the shares issued (50 shares x $10 par value x 50 bonds = $25,000). The unamortized bond discount of $1,000 is debited, and the remaining amount is credited to Additional Paid-In Capital.

A Bond Issue of $50,000 with a Carrying Value of $49,000