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alliemeade1
alliemeade1
14.03.2020 • 
Business

Marley, Inc. sold $500,000 of its ten-year 8% bonds at 96 on January 1, 2014. Interest is paid each January 1 and July 1 and straight-line amortization is used. Each $1,000 bond is convertible into 100 shares of $10 par common stock. One-half of the bonds were converted on January 1, 2019, when the market value of the stock was $14 per share.

1.

The entry to record the conversion using the book value method would include a

a.

debit to Loss on Conversion for $5,000.

b.

debit to Retained Earnings for $5,000.

c.

debit to Discount on Bonds Payable for $5,000.

d.

credit to Additional Paid-in Capital from Bond Conversion for $5,000.

2.

The entry to record the conversion using the market value method would include a

a.

debit to Additional Paid-in Capital from Bond Conversion for $105,000.

b.

debit to Retained Earnings for $105,000.

c.

debit to Loss from Conversion for $105,000.

d.

credit to Gain from Conversion for $105,000.

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