Question

Marigold Corp. issued at a premium of $9200 a $198000 bond issue convertible into 4800 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $3600, the market value of the bonds is $218000, and the stock is quoted on the market at $60 per share. If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds?

Prepare the journal entry to record the conversion of the bonds to common stock.

Answer 1

Step-by-step explanation:

The journal entry is shown below:

Bonds payable A/c Dr $198,000

Premium on bonds payable A/c Dr $3,600

To Common stock A/c $96,000

To Paid in capital in excess of par - Common stock A/c $105,600

(Being the conversion of bonds is recorded)

The computation is shown below:

For Common stock:

= 4,800 shares × $20

= $96,000

And, the remaining balance is credited to paid in capital in excess of par