Koch sells premium convertible bonds. Interest is paid on 5/31 and 11/30 of each year. On 5/31, after paying the interest, the value of 1000 dinars from these bonds is subtracted to convert them into 3000 shares with a nominal value of 10 dinars for each share of the common shares whose market price at that date was 40 dinars per share. How should Koch calculate the conversion of bonds to common stock using the book value method? Discuss the rationale for this method.