A Bond with a Carrying Value of $790,000 Was Converted

question 7

Multiple Choice

A bond with a carrying value of $790,000 was converted into 100,000 shares of $5 per share par value common stock at a time when the market value per share was $9.00 per share.Which of the following statements does not accurately describe the financial accounting for the conversion?

• A)A loss of $110,000 will be recognized if the market value method of recording the conversion is used.
• B)Total owners' equity increases $790,000 if the market value method of recording the conversion is used.
• C)Total owners' equity increases $790,000 if the book value method of recording the conversion is used.
• D)Total owners' equity increases $900,000 if the market value method of recording the conversion is useD.

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Definitions:

Consumption

The usage of resources or products for the purpose of satisfying human needs or wants.

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal.

Income

The monetary payment received for one's work, investments, or other sources, primarily used for personal consumption, savings, and investment.

Present Value

The present value of an expected amount of money or sequence of cash flows, with a given return rate.