If Bonds with a Face Value of $140000 Are Converted

question 84

Multiple Choice

If bonds with a face value of $140000 are converted into common stock when the carrying value of the bonds is $135000 the entry to record the conversion will include a debit to

• A) Bonds Payable for $140000.
• B) Bonds Payable for $135000.
• C) Discount on Bonds Payable for $5000.
• D) Bonds Payable equal to the market price of the bonds on the date of conversion.

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Definitions:

Marginal Costs

The additional cost incurred in the production of one more unit of a good or service.

Fixed Costs

Costs that do not change with the amount of goods or services produced, such as rent, salaries, or insurance.

Accounting Profit

Profits as shown on a company’s financial statements. Accounting profit does not necessarily correspond to real or economic profit.

Variable Costs

Costs that vary directly with the level of production or a company's output, such as materials and labor.