If Bonds with a Face Value of $150,000 Are Converted

question 96

Multiple Choice

If bonds with a face value of $150,000 are converted into common stock when the carrying value of the bonds is $135,000, the entry to record the conversion will include a debit to

• A) Bonds Payable for $150,000.
• B) Bonds Payable for $135,000.
• C) Discount on Bonds Payable for $15,000.
• D) Bonds Payable equal to the market price of the bonds on the date of conversion.

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Definitions:

Freight-Out

Refers to the cost associated with shipping goods to customers, a part of the selling expenses in accounting.

Periodic Inventory System

An inventory system that records inventory levels and the cost of goods sold at specific intervals, rather than continuously.

FOB Shipping Point

A delivery term indicating that the buyer assumes responsibility for the goods and the risk of damage at the moment the goods leave the seller's premises.

FOB Destination

A shipping term indicating that the seller bears delivery costs and retains ownership until the goods are delivered to the buyer.