On June 30, 2021, Blair Industries had outstanding $82 million of 8% convertible bonds that mature on June 30, 2022. Interest is payable each year on June 30 and December 31. The bonds are convertible into 6 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 $40 per share. When recording the conversion, Blair should credit paid-in capital excess of par:
Multiple Choice
$9 million
$7 million
$11 min
$13 million
Homework Answers
Half of bonds are converted to stock = 50% of 82 million = $41 million
Common stock = $6million *50%*10 =$30 million
Unamortized balance in bond discount = $4*50% =$2 million
Additional paid in capital = convertible bonds - common stock - Unamortized bond discount =$41 - $30 -$2 =$9 million
Answer (a)
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