Question

# Sheridan Corporation has outstanding 1,700 \$1,000 bonds, each convertible into 70 shares of \$10 par value...

Sheridan Corporation has outstanding 1,700 \$1,000 bonds, each convertible into 70 shares of \$10 par value common stock. The bonds are converted on December 31, 2020, when the unamortized discount is \$26,900 and the market price of the stock is \$21 per share.

Record the conversion using the book value approach. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

Number of bonds outstanding = 1,700

Par value of 1 bond = \$1,000

Par value of bonds = Number of bonds outstanding x Par value of 1 bond

= 1,700 x 1,000

= \$1,700,000

Unamortized discount on bonds = \$26,900

1 bond is convertible into 70 shares.

Number of shares to be issued = 1,700 x 70

= 119,000

Par value of 1 share = \$10

Common stock will be credited by = Number of shares to be issued x Par value of 1 share

= 119,000 x 10

= \$1,190,000

Paid in capital in excess of par - common will be credited by = Par value of bonds- Unamortized discount on bonds-Common stock

= 1,700,000-26,900-1,190,000

= \$483,100

Account Titles and Explanation

Debit

Credit

Bonds payable \$1,700,000
Discount on bonds payable \$26,900
Common stock \$1,190,000
Paid in capital in excess of par-common \$483,100