Carrington Industries Converts $200,000 of Par Value Bonds,with a Carrying

question 171

Multiple Choice

Carrington Industries converts $200,000 of par value bonds,with a carrying value of $100,000,into 50,000 shares of $1 par value common stock..How would the company record this transaction?

• A)Debit Bonds Payable for $200,000 and credit Cash for $100,000.
• B)Debit Bonds Payable for $200,000,credit Common Stock for $50,000,and credit Paid-In Capital in Excess of Par Value for $150,000.
• C)Debit Bonds Payable for $200,000 and credit Common Stock for $200,000.
• D)Debit Common Stock for $50,000,credit Paid-In Capital in Excess of Par Value for $150,000,and credit Bonds Payable for $200,000.
• E)Debit Bonds Payable for $50,000 and credit Common Stock for $50,000.

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Definitions:

Corn

A cereal plant which yields large kernels set in rows on a cob; an important crop for food, livestock feed, and ethanol production.

Hedged Delivery

A technique used in trading and finance to mitigate risk by taking opposite positions in a market to protect against price movements.

Futures Contract

Agreements to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.

Corn

A cereal plant that yields large grains, or kernels, set in rows on a cob; often grown as food for humans and fodder for animals.