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.

Question

Miguel Escobar

Business

16 June, 05:20

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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Cecelia Gonzales · Answer 1

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