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Calculate: Paid in Capital Excess

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Question: Peters Co had two issues of securities outstanding: common stock and an 8% convertible bond issued in the face amount of $12,000,000. Interest payment dates of the bond issue are June 30 and December 31. The conversion clause in the bond indenture entitles the bondholders to receive forth shares of $20 par value common stock in exchange for each $1,000 bond. On June 30, 2004 the holders of $1,800,000 face value bonds exercised the conversion privilege. The market price of the bonds on that date was $1,100 per bond and the market price of the common stock was $35. The total unamortized bond discount at the date of conversion was $750,000. In applying the book value method, what amount should Peters credit to the account "paid in capital in excess of par," as a result of this conversion?

a. $1,080,000
b. 540,000
c. 247,500
d. 120,000

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Solution Summary

In about 90 words, this solution explains how to calculate the paid in capital excess value. All calculations and steps are included.

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The unamortized bond discount applicable to 1,800,000 face value bonds is 750,000 X 1,800,000/12,000,000 = 112,500. The carrying value of bonds is ...

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