On January 1,$300,000 of par value bonds with a carrying value of $310,000 is converted to 50,000 shares of $5 par value common stock.The entry to record the conversion of the bonds includes all of the following entries except:
A)Debit to Bonds Payable $310,000.
B)Debit to Premium on Bonds Payable $10,000.
C)Credit to Common Stock $250,000.
D)Credit to Paid-In Capital in Excess of Par Value,Common Stock $60,000.
E)Debit to Bonds Payable $300,000.

Question

Quizplus · Accepted Answer

The entry to record the conversion of bonds to common stock includes debiting Bonds Payable for the face value of the bonds being converted ($300,000), debiting Premium on Bonds Payable for any unamortized premium ($10,000), crediting Common Stock for the par value of the shares issued (50,000 x $5 = $250,000), and crediting Paid-In Capital in Excess of Par Value, Common Stock for the excess of the fair value of the shares issued over the par value (50,000 x [$310,000 - $10,000]/50,000 - $250,000 = $60,000). Therefore, option A is not included in the entry to record the conversion.

On January 1,$300,000 of Par Value Bonds with a Carrying