Question
Low land Company had two issues of securities outstanding: common stock and 10% convertible bond issue in the face amount of $110,000,000. Interest payment dates
Low land Company had two issues of securities outstanding: common stock and 10% convertible bond issue in the face amount of $110,000,000. 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 Low Land company credit to the account "paid-in capital in excess of par," as a result of this conversion? |
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