Bonds with a maturity value of $100,000 and a carrying value of $104,000 are converted into common shares.The entry will include a:

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When bonds are converted into common shares, the bonds payable account is extinguished and replaced by the common shares issued. Therefore, the entry will include a credit to Common Shares for the carrying value of the bonds, which is $104,000 in this case. There is no need to debit Bonds Payable or credit Premium on Bonds Payable because the carrying value of the bonds already includes any premium or discount that may have been present. The conversion of the bonds into common shares is not related to the original face value of the bonds, so there is no need to credit Common Shares for $100,000.

Bonds with a Maturity Value of $100,000 and a Carrying