Question

On July 1, 2021, an interest payment date, $153000 of Oriole Company bonds were converted into 3070 shares of Oriole Company common stock each having a par value of $45 and a market value of $54. There is a $5900 unamortized discount on the bonds. Using the book value method, Oriole would record:

Answer 1

Answer:

$17,900

Explanation:

= ($153,000-$5,900-(3070*45))*2

= ($153,000 - $5,900 - $138,150)*2

= ($8,950)*2

= $17,900 -  increase in paid-in capital in excess of par

NB - When a company issues bonds, it incurs a long-term liability on which periodic interest payments must be made, usually twice a year.