Petrenko Corporation has outstanding 2,000 $1,000 bonds

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Petrenko Corporation has outstanding 2,000 $1,000 bonds

Brief Exercise 16-02

Petrenko Corporation has outstanding 2,000 $1,000 bonds, each convertible into 50 shares of $10 par value common stock. The bonds are converted on December 31, 2020, when the unamortized discount is $30,000 and the market price of the stock is $21 per share.

Record the conversion using the book value approach.

business accounting

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Answer 1

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Account title and Explanation	Debit	Credit
Bonds payable [2,000 x $1,000]	$2,000,000
Discount on bonds payable		$30,000
Common stock [2,000 bonds x 50 shares x $10 par]		$1,000,000
Paid-in capital in excess of par-Common stock*		$970,000
[To record conversion of bonds in to common stock]

*Paid-in capital in excess of par-common stock is balancing figure

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Answer 2

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Petrenko Corporation has outstanding 2,000 $1,000 bonds

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Petrenko Corporation has outstanding 2,000 $1,000 bonds

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