1

A company has $3,000,000 of 8% 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, 2014, the holders of $960,000 bonds exercised the conversion privilege. On that date the market price of the bonds was 105 and the market price of the common stock was $36. The total unamortized bond premium at the date of conversion was $210,000. The company should record, as a result of this conversion, a

credit of $163,200 to Paid-in Capital in Excess of Par.

credit of $67,200 to Premium on Bonds Payable.

none of these answers are correct

loss of $9,600.

credit of $144,000 to Paid-in Capital in Excess of Par.

2O

On January 1, 2015, a company had 250,000 shares of its $2 par value common stock outstanding. On March 1, the company sold an additional 500,000 shares on the open market at $20 per share. the company issued a 20% stock dividend on May 1. On August 1, the company purchased 280,000 shares and immediately retired the stock. On November 1, 400,000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2015?

477,777

344,444

750,000

1,020,000

none of these answers are correct

3

Companies routinely issue convertible bonds to investors. From an accounting standpoint, the conversion of bonds is most commonly recorded by the

proportional method

none of these answers are correct

conversion value method

market value method

incremental method

4

On May 1, 2014, a company issued $1,500,000 of 7% bonds at 103, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of the company's common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value of the company's common stock was $35 per share and of the warrants was $2. On May 1, 2014, the company should record the bonds with a

premium of $45,000.

discount of $15,000.

discount of $16,800.

none of these answers are correct

discount of $60,000.

5

A Company had two issues of securities outstanding: common stock and an 8% convertible bond issue in the face amount of $12,000,000. Interest payment dates of the bond issue are June 30th and December 31st. The conversion clause in the bond indenture entitles the bondholders to receive forty shares of $20 par value common stock in exchange for each $1,000 bond. On June 30, 2014, the holders of $1,800,000 face value bonds exercised the conversion privilege. The market price of the bonds on that date was $1,100 per bond and the market price of the common stock was $35. The total unamortized bond discount at the date of conversion was $750,000. In applying the book value method, what amount should A Company credit to the account "paid-in capital in excess of par," as a result of this conversion?

$ 247,500.

$1,080,000.

$ 540,000.

none of these answers are correct

$ 120,000.