Geo co. has $5,000,000 of 9% 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, 2020, the holders of all the 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 $350,000.

Using the market value method and the market value of the common stock. Geo should record as a result of this conversion a a credit of $350,000 to Paid-in Capital in Excess of Par. b. a credit of $900,000 to Paid-in Capital in Excess of Par. c. a credit of $850,000 to Paid-in Capital in Excess of Par. d. an extraordinary gain of $ 50,000. 2.

Using the book value method, Geo should record as a result of this conversion a a credit of $350,000 to Paid-in Capital in Excess of Par. b. a credit of $900,000 to Paid-in Capital in Excess of Par. c. a credit of $850,000 to Paid in Capital in Excess of Par. d. an extraordinary gain of $ 50,000.