ABC Corp has $2,500,000 of 8% 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, 2007, the holders of $800,000 bonds exercised the conversion privilege. On that date the market price of the bonds was 105 and the market price of the common stock was $36. The total unamortized bond premium at the date of conversion was $175,000. Jenks should record, as a result of this conversion, a© BrainMass Inc. brainmass.com October 1, 2020, 8:34 pm ad1c9bdddf
The total unamortized bond premium is 175,000. The premium for $800,000 of bonds is
175,000/2,500,000 X 800,000
The carrying ...
This solution provides the calculations and identifies the correct entry to make.