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

Question

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When bonds are converted into common stock, the carrying value of the bonds is transferred from the liability section to the equity section of the balance sheet. Specifically, the amount is transferred to the paid-in capital section, which represents the amount of capital contributed by shareholders through the issuance of stock. This transaction does not affect the income statement or retained earnings.

When Bonds Are Converted into Common Stock, the Carrying Value