If Sixty $1,000 Convertible Bonds with a Carrying Value of $70,000

question 202

Multiple Choice

If sixty $1,000 convertible bonds with a carrying value of $70,000 are converted into 9,000 shares of $5 par value common stock, the journal entry to record the conversion is

• A) Bonds Payable 70,000 Common Stock 70,000
• B) Bonds Payable 60,000 Premium on Bonds Payable 10,000
• Common Stock 70,000
• C) Bonds Payable 60,000 Premium on Bonds Payable 10,000
• Common Stock 45,000
• Paid-in Capital in Excess of Par 25,000
• D) Bonds Payable 70,000 Discount on Bonds Payable 10,000
• Common Stock 45,000
• Paid-in Capital in Excess of Par 15,000

---

Definitions:

Variable Costs

Expenses that change in proportion to the level of production or business activity.

Sales Commissions

The payment made to sales personnel, often calculated as a percentage of the sales they generate, as a reward for their efforts in selling products or services.

Raw Materials

Basic materials that are used in the manufacturing process to produce goods or finished products.

Breakeven Point

The point at which total costs and total revenue are equal, resulting in no net loss or gain for the business.