The usual entry to record the conversion of convertible bonds or preferred stock into common shares ignores _____ and shows the swap of common shares for bonds or preferred stock at their _____.

Question

Quizplus · Accepted Answer

The usual entry for converting convertible bonds or preferred stock into common shares ignores current market prices and records the transaction at the carrying value of the bonds or preferred stock, not at their market value or par value. This approach focuses on the book value (carrying value) of the instruments being converted rather than their market value or any other valuation metric.

The Usual Entry to Record the Conversion of Convertible Bonds