When Bonds Are Converted into Common Stock

question 130

Multiple Choice

When bonds are converted into common stock

• A) the market price of the stock on the date of conversion is credited to the Common Stock account.
• B) the market price of the bonds on the date of conversion is credited to the Common Stock account.
• C) the market price of the stock and the bonds is ignored when recording the conversion.
• D) gains or losses on the conversion are recognized.

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Definitions:

Cost Center Evaluation

The process of analyzing the performance and efficiency of a department or unit within an organization that does not directly generate revenue.

Controllable Margin

The amount of profit or contribution margin that a manager can directly influence by controlling costs and generating revenues.

Contribution Margin

The amount by which a product's selling price exceeds its total variable costs, indicating how much contributes to covering fixed costs and generating profit.

Dollar Amount

A specific value of money in terms of the currency of the United States, expressed in dollars.