When bonds payable are converted into stock,the carrying value of the bonds should be
A)credited to Retained Earnings.
B)credited to contributed capital accounts.
C)debited to Retained Earnings.
D)debited to Loss on Conversion of Bonds.

Question

Quizplus · Accepted Answer

When bonds payable are converted into stock, the carrying value of the bonds (the face value plus any unamortized premium or less any unamortized discount) is transferred to the contributed capital accounts (such as Common Stock or Preferred Stock). This represents the value of the bonds that are being exchanged for stock. There is no impact on Retained Earnings or Loss on Conversion of Bonds in this transaction.

When Bonds Payable Are Converted into Stock,the Carrying Value of the Bonds