Question
Please show steps thanks! Marley, Inc. sold $500,000 of its ten-year 8% bonds at 96 on January 1, 2014. Interest is paid each January 1
Please show steps thanks!
Marley, Inc. sold $500,000 of its ten-year 8% bonds at 96 on January 1, 2014. Interest is paid each January 1 and July 1 and straight-line amortization is used. Each $1,000 bond is convertible into 100 shares of $10 par common stock. One-half of the bonds were converted on January 1, 2019, when the market value of the stock was $14 per share.
1.
The entry to record the conversion using the book value method would include a
| a. | debit to Loss on Conversion for $5,000. |
| b. | debit to Retained Earnings for $5,000. |
| c. | debit to Discount on Bonds Payable for $5,000. |
| d. | credit to Additional Paid-in Capital from Bond Conversion for $5,000.
|
2.
The entry to record the conversion using the market value method would include a
| a. | debit to Additional Paid-in Capital from Bond Conversion for $105,000. |
| b. | debit to Retained Earnings for $105,000. |
| c. | debit to Loss from Conversion for $105,000. |
| d. | credit to Gain from Conversion for $105,000.
|
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