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24 May, 19:02

Marigold Corp. issued at a premium of $9200 a $198000 bond issue convertible into 4800 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $3600, the market value of the bonds is $218000, and the stock is quoted on the market at $60 per share. If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds?

Prepare the journal entry to record the conversion of the bonds to common stock.

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  1. 24 May, 19:51
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    The journal entry is shown below:

    Bonds payable A/c Dr $198,000

    Premium on bonds payable A/c Dr $3,600

    To Common stock A/c $96,000

    To Paid in capital in excess of par - Common stock A/c $105,600

    (Being the conversion of bonds is recorded)

    The computation is shown below:

    For Common stock:

    = 4,800 shares * $20

    = $96,000

    And, the remaining balance is credited to paid in capital in excess of par
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