Question

Sun corp issues $100,000 convertible bonds at a premium. Bonds are convertible into 2,000 shares of...

Sun corp issues $100,000 convertible bonds at a premium. Bonds are convertible into 2,000 shares of common stock (par$40). At the time of conversion, the bonds have a FMV of $110,000, common stock has a FMV of $60 per share and unamortized premium on bonds is $2,000. What is the amount of paid in capital in excess of par on common stock upon coversion?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Par value of bonds = $100,000

Unamortized bond premium = $2,000

Number of common shares to be issued = 2,000

Par value of 1 common share = $40

Total amount to be credited to common stock at the time of conversion = Number of common shares to be issued x Par value of 1 common share

= 2,000 x 40

= $80,000

Total amount to be credited to paid in capital in excess of par on common stock upon conversion = Par value of bonds + Unamortized bond premium - Total amount to be credited to common stock at the time of conversion

= 100,000 + 2,000 - 80,000

= $22,000

FMV of bonds and common stock is not relevant at the time of conversion.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Litke Corporation issued at a premium of $10,000 a $200,000 bond issue convertible into 4,000 shares...
Litke Corporation issued at a premium of $10,000 a $200,000 bond issue convertible into 4,000 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $4,000, the market value of the bonds is $220,000, and the stock is quoted on the market at $60 per share. If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds?
Q22:Suppose a firm issues a single bond with a face value of $100,000 which is Convertible...
Q22:Suppose a firm issues a single bond with a face value of $100,000 which is Convertible into 10,000 Ordinary Shares with a Par Value of $1. The credit entry to “Share Premium – Conversion Equity” on the date of issue was for $20,000.   Assume that the maturity date of the bonds has now arrived and the bonds will be converted into Ordinary Shares. The Entry to the “Share Premium – Conversion Equity” account on the date of conversion will be...
Concord Corporation has $4080000 of 7% convertible bonds outstanding. Each $1,000 bond is convertible into 30...
Concord Corporation has $4080000 of 7% convertible bonds outstanding. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2021, the holders of $1220000 bonds exercised the conversion privilege. On that date the market price of the bonds was 106 and the market price of the common stock was $37. The total unamortized bond premium at the date of conversion was $271000. Concord...
PayPow Corp. has outstanding 8,000, $1,000 bonds. Each bond is convertible into 100 shares of $1...
PayPow Corp. has outstanding 8,000, $1,000 bonds. Each bond is convertible into 100 shares of $1 par value common stock. The bonds are converted on December 31, 2017 when the unamortized discount on the bonds is $60,000 and the market price of the stock is $30 per share. The journal entry to record the conversion would require a: Select one: Credit to common stock of $24,000,000 Debit to discount on bonds payable of $60,000 Credit to paid in capital of...
LIEN company issues $5,600,000 of 12%, 40-year convertible bonds at 103. At the time of conversion,...
LIEN company issues $5,600,000 of 12%, 40-year convertible bonds at 103. At the time of conversion, the Premium on Bonds Payable account has a balance of $150,000. All convertible bonds are converted into common stocks, and each $1,000 bond is convertible into 10 shares of common stock with a par value of $1 per share. 1) Prepare the journal entry to record the issuance of convertible bonds. 2) Prepare the journal entry to record the bond conversion.
Kelly Company issued $100,000 of 5%, 10-year bonds at 102 to a single investor. Each of...
Kelly Company issued $100,000 of 5%, 10-year bonds at 102 to a single investor. Each of the $1,000 bonds was convertible into 100 shares of no par common stock. The bonds were later converted when the remaining unamortized premium was $1,000. What is the amount that Kelly will credit to Common Stock when recording the conversion of the bonds?
Sunland Corp. issued $18,000,000 par value 10% convertible bonds at 99. If the bonds had not...
Sunland Corp. issued $18,000,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company’s investment banker estimates they would have been sold at 95. 2. Coronado Company issued $18,000,000 par value 10% bonds at 98. One detachable stock purchase warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $5. 3. Suppose Sepracor, Inc. called its convertible debt in 2020. Assume the following related to...
Finks Co. has $2,500,000 (face value) of 8% convertible bonds outstanding which were issued at a...
Finks Co. has $2,500,000 (face value) of 8% convertible bonds outstanding which were issued at a premium. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on December 31. On December 31, 2020, the holders of 40% of the bonds exercised the conversion privilege. On that date, the market price of the common stock was $36. The total unamortized bond premium at the date of conversion (after the journal entry to...
Richmond Co. sold convertible bonds at a premium. Interest is paid on May 31 and November...
Richmond Co. sold convertible bonds at a premium. Interest is paid on May 31 and November 30. On May 31, after interest was paid, 100, $1,000 bonds are tendered for conversion into 3,000 shares of $10 par value ordinary shares that had a market price of $40 per share. How should Richmond Co. account for the conversion of the bonds into ordinary shares under the book value method? Discuss the rationale for this method.
Problem 14-19A Convertible bonds; induced conversion; bonds with detachable warrants [LO 14-5] Bradley-Link’s December 31, 2018,...
Problem 14-19A Convertible bonds; induced conversion; bonds with detachable warrants [LO 14-5] Bradley-Link’s December 31, 2018, balance sheet included the following items: Long-Term Liabilities 9.0% convertible bonds, callable at 103 beginning in 2019, due 2021 (net of unamortized discount of $3) [note 8] 11.0% registered bonds callable at 106 beginning in 2025, due 2027 (net of unamortized discount of $1.5) [note 8] Shareholders’ Equity Equity—stock warrants Note 8: Bonds (in part) ($ in millions) $147 68.5 5 The 9.0% bonds...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT