On July 1, year 1, after recording interest and amortization, Wake Companys shareholders converted $ 1,000,000 of its 10 convertible bonds into 50,000 shares of its $ 1 par value common stock On the conversion date, the carrying amount of the bonds was $ 1,500,000, the market value of the bonds was...

Choice d is correct This question is asking about a bond conversion and how much additional p ...

On July 1, year 1, after recording interest and amortization, Wake Companys shareholders converted $ 1,000,000 of

Question:

On July 1, year 1, after recording interest and amortization, Wake Company’s shareholders converted $ 1,000,000 of its 10% convertible bonds into 50,000 shares of its $ 1 common stock. On the conversion date, the carrying amount of the bonds was $ 1,500,000, the market value of the bonds was $ 1,400,000, and Wake’s was publicly trading at $ 40 per share. Using the book value method, what amount of additional paid- in capital should Wake record as a result of the conversion?
a. $ 500,000
b. $ 1,500,000
c. $ 1,950,000
d. $ 1,450,000 Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...