Question

Bridgeport Company has bonds payable outstanding in the amount of $440,000, and the Premium on Bonds Payable account has a balance of $7,400. Each $1,000 bond is convertible into 20 shares of preferred stock of par value of $50 per share. All bonds are converted into preferred stock. Assuming that the book value method was used, what entry would be made? (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

Answer 1

Conversion recorded at book value of the bonds:

Bonds Payable........................................................................................440,000

Premium on Bonds Payable..................................................................7,400

Preferred Stock (440 X 20 X $50).............................................. 440,000

Paid-in Capital in Excess of Par(Preferred Stock)......................................................................7,400