A Bond Issue of $50,000 with a Carrying Value of $49,000

question 147

Multiple Choice

A bond issue of $50,000 with a carrying value of $49,000 is converted into $10 par value common stock at the rate of fifty shares for each $1,000 bond.The entry to record the conversion of bonds would be:

• A) Bonds Payable 50,000
• Loss on Retirement of Bonds 1,000
• Unamortized Bond Discount 1,000
• Common Stock 50,000
• B) Bonds Payable 50,000
• Common Stock 25,000
• Additional Paid-In Capital 25,000
• C) Bonds Payable 50,000
• Common Stock 25,000
• Additional Paid-In Capital 24,000
• Unamortized Bond Discount 1,000
• D) Bonds Payable 49,000
• Unamortized Bond Discount 1,000
• Common Stock 25,000
• Additional Paid-In Capital 25,000

Understand the accounting treatment of unrealized gains on available-for-sale securities.

Identify the key components and purpose of consolidated financial statements.

Describe the characteristics and implications of various investment types and related accounts.

Interpret the impact of year-end adjustments on trading securities for financial statements.

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Definitions:

Marginal Costs

The uplift in total financial outlay required for the making of another unit of a product or service.

Cournot Duopolists

Firms in a market where only two producers exist and compete under the Cournot assumption, where each firm decides its production level assuming the output of its competitor is fixed.

Demand for Wine

The total quantity of wine that consumers are willing and able to purchase at various prices within a specific time period.

Imports

Goods and services purchased from other countries for domestic consumption, often contrasted with exports.