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25 May, 00:20

Suppose Sepracor, Inc. called its convertible debt in 2020. Assume the following related to the transaction. The 10%, $10,000,000 par value bonds were converted into 1,000,000 shares of $1 par value common stock on July 1, 2020. On July 1, there was $51,000 of unamortized discount applicable to the bonds, and the company paid an additional $68,000 to the bondholders to induce conversion of all the bonds. The company records the conversion using the book value method.

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  1. 25 May, 00:37
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    To record the conversion:

    Dr Debt conversion expense 68,000

    Dr Bonds payable 10,000,000

    Cr Discount on bonds 51,000

    Cr Common stock 1,000,000

    Cr Paid in capital in excess of common stock 8,949,000

    Cr Cash 68,000
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