Question

On December 31, Lowland, Inc., converts its $900,000 par value bonds (carrying value also $900,000) into 90,000 shares of $6 par value common stock. Complete the necessary journal entry by selecting the account names and dollar amounts from the drop-down menus.

Answer 1

Lowland, Inc., entry to record this conversion includes a

Dr Bonds Payable $900,000

Cr Common Stock $540,000

( 90,000 shares x $6 par value per share)

Cr Paid-In Capital in Excess of Par Value $360,000

($900,000 -$540,000)

Step-by-step explanation:

Since Lowland, Inc. converted its $900,000 par value bonds and carrying value also $900,000) into 90,000 shares of $6 par value common stock which means we have to Debit Bonds Payable with $900,000 and Credit Common Stock with $540,000 which is

( 90,000 shares x $6 par value per share) , then Credit Paid-In Capital in Excess of Par Value for $360,000 which is ( value of bonds converted of $900,000 - par value of shares of common stock issued of $540,000).