Vargo Company has bonds payable outstanding in the amount of $500,000, and the Premium on Bonds Payable

Question:

Vargo Company has bonds payable outstanding in the amount of $500,000, and the Premium on Bonds Payable account has a balance of $7,500. Each $1,000 bond is convertible into 20 shares of preferred stock of of $50 per share. All bonds are converted into preferred stock.

Instructions
Assuming that the book value method was used, what entry would be made?

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...