CPAnet Forum: bond

Active Topics

Memberlist

Help

FAR STUDY GROUP
CPAnet Forum : FAR STUDY GROUP

Topic: bond (

Topic Closed)

Author

Message

<< Prev Topic | Next Topic >>

blueberry028
Newbie
Newbie

Joined: 18 May 2016
Location: United States
Online Status: Offline
Posts: 5

Posted: 20 Jun 2016 at 15:46 \| IP Logged

Bondholders of Balm Co. converted their bonds into
90,000 shares of $5 par value common stock. In Balm's
accounting records, the bonds had a par value of
$775,000 and unamortized discount of $23,000 at the
time of conversion. What amount of additional paid-in
capital from the conversion should Balm record?

a.
$348,000
b.
$798,000
c.
$302,000
d.
$325,000

can anyone help on this,because I don't understand why
unamortized discount need to be subtracted to the
amount of bond payable, I thought we need add to the
par value,thank you very much!

Drose6
Newbie
Newbie

Joined: 06 Jul 2016
Location: United States
Online Status: Offline
Posts: 1

Posted: 06 Jul 2016 at 09:38 \| IP Logged

Choice "c" is correct. No gain or loss is recognized at conversion.
Atconversion, the bond payable and discount are written off and
commonstock is credited at par. Additional paid in capital is credited
for theexcess of the bond's carrying value over the stock's par
value.Debit (Dr)Credit (Cr)Bond Payable775,000Unamortized
discount23,000Common stock −par value450,000Additional paid in
capital302,000

Found this online

Sorry, you can NOT post a reply.
This topic is closed.

Printable version

You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot delete your posts in this forum
You cannot edit your posts in this forum
You cannot create polls in this forum
You cannot vote in polls in this forum