18. Peters Corporation had two issues of securities outstanding: common stock and an 8% convertible bond issue in the face amount of $12,000,000. Interest payment dates of the bond issue are June 30th and December 31st. The conversion clause in the bond indenture entitles the bondholders to receive forty shares of $20 par value common stock in exchange for each $1,000 bond. On June 30, 2004, the holders of $1,800,000 face value bonds exercised the conversion privilege. The market price of the bonds on that date was $1,100 per bond and the market price of the common stock was $35. The total unamortized bond discount at the date of conversion was $750,000. In applying the book value method, what amount should Peters credit to the account "paid-in capital in excess of par," as a result of this conversion?

 a. $247,500.

 b. $120,000.

 c. $1,080,000.

 d. $540,000

Please help with this problem

agreed. we only take a portion of the bond discount for the "bonds converted".

Unamortized bond discount on "bonds converted" =

Total unamortized discount X FV of Bonds Converted / FV of total bonds

 = 750,000 X 1,800,000/ 12,000,000   

= $112,500