Answer:
Explanation:
The journal entry is shown below:
Bonds payable A/c Dr $500,000
Premium on bonds payable A/c Dr $28,125
To Common stock A/c $450,000
To Paid in capital in excess of par A/c $78,125
(Being the conversion of bonds is recorded)
The computation is shown below:
For Premium on bonds payable:
= $500,000 ÷ $2,000,000 × $112,500
= $28,125
For Common stock:
= $500,000 ÷ $1,000 × 30 × $30
= $450,000
And, the remaining balance is credited to paid in capital in excess of par
