Question

Concord Corporation has $4080000 of 7% convertible bonds outstanding. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2021, the holders of $1220000 bonds exercised the conversion privilege. On that date the market price of the bonds was 106 and the market price of the common stock was $37. The total unamortized bond premium at the date of conversion was $271000. Concord should record, as a result of this conversion, a:_________.

a. credit of $163,200 to Paid-in Capital in Excess of Par.
b. credit of $144,000 to Paid-in Capital in Excess of Par.
c. credit of $67,200 to Premium on Bonds Payable.
d. loss of $9,600.

Answer 1

a.credit of $163,200 to Paid-in Capital in

Step-by-step explanation:

Excess of Par.

$1220000 + ($271,000 × .32) – (1220 × 30 × $30)

=$163,200

$1220000/1000

=1220