Conversion of bonds payable into common stock will include a:
A)debit to bonds payable and credit to cash.
B)debit to bonds payable and credit to common stock.
C)credit to bonds payable and debit to common stock.
D)debit to cash and credit to bonds payable.

Question

Quizplus · Accepted Answer

Conversion of bonds payable into common stock involves exchanging debt (bonds payable) for equity (common stock). Therefore, a debit to bonds payable (to reduce the liability) and a credit to common stock (to increase equity) would be appropriate. There is no involvement of cash in this transaction.

Conversion of Bonds Payable into Common Stock Will Include A