Question

On June 30, 2021, Blair Industries had outstanding $106 million of 9% convertible bonds that mature on June 30, 2022. Interest is payable each year on June 30 and December 31. The bonds are convertible into 9 million shares of $10 par common stock. At June 30, 2021, the unamortized balance in the discount on bonds payable account was $4 million. On June 30, 2021, half the bonds were converted when Blair's common stock had a market price of $43 per share. When recording the conversion, Blair should credit paid-in capital-excess of par: 

• $8 million. 

• $4 million. 

• $6 million. 

• $10 million.

Answer 1

Answer (C) $ 6 million Bond Bond is one of the source of raising funds from the ||public - _ Bonds have various types... via convertible, non-convertible | redeemable, Neredecenablem,etc are the bypis._of..bonds. An Organisation I will issue bonds and get a cash for you in the openghen Lafither business for Yure of such funds company 02||| bearcal H19_the_form of interest expense. This expense will provide begebit_of_box_shield. A0_0199n)sq.tjoh Willu ! bonds oqqu discount ov_.axemium. An organisq[129 Willamortizë suchen I discount or premium over a life In the question, Blair Industries conuested half_coquexbible beplan into the common stock on such a dale company will amoutine the discount costs_10/icissue common stock. The balance recogio | to cover the outstanding balance of_bonds is the paid - in Capital exceis of por :: BLAIR INDUSTRIES Joyun gl_Enby to record conversion of bents CAE. 12 ml) -) Date Pauti dars Aml. (1) Aml-192 || June 30 | Bonds Payable Ale (207) (loc million X 50%) 53 2011 | To Discount on Bonds Payable. Ale ($ 4 million X 90%) To Common Stock [9 milljun X 50% * #10) : To paid -10. Golkyl - Excess of my CBql.f1940) I reeing to record conversion of bonds) 53 53 when recording coquesjon B1908 should credit pull-inopilak - excess of_pan : 1 (©)_6_million No Interest is recorded as the conversion dole is same as outstanding date of bonus. 53 WS

Answer 2

Answer: B) $8 million. Explanation: There are $80 worth of convertible bonds, since half of them were converted to common stocks = $80 million x 50% = $40 million Common stock = 6 million shares x 50% x $10 (par value) = $30 million Unamortized balance in bond discount = $4 million x 50% = $2 million Additional paid-in capital = convertible bonds - common stock - unamortized bond million = $8 million discount = $40 million - $30 million - $2 June 30, 2013, Bond convertion: Dr Bonds payable 40,000,000 Cr Common stock 30000000 Cr Discount on bonds payable 2000000 Cr Additional paid-in capital in excess of par value 8,000,000