When bonds are converted into common stock the carrying value of the bonds is transferred to paid-in capital accounts.

Question

Quizplus · Accepted Answer

When bonds are converted into common stock, the carrying value of the bonds is transferred to the paid-in capital accounts, not retained earnings or any other accounts. This transfer is done on the date of conversion and reflects the additional paid-in capital that the company receives due to the bondholders converting their bonds into equity ownership.

When Bonds Are Converted into Common Stock the Carrying Value