Question

Petrenko Corporation has outstanding 2,000 \(1,000 bonds, each convertible into 50 shares of \)10 par value common stock. The bonds are converted on December 31, 2017, when the unamortized discount is \(30,000 and the market price of the stock is \)21 per share. Record the conversion using the book value approach.

Short answer

Bonds payable will be debited with $2,000,000 and discount on bonds payable; common stock;Paid-in Capital in Excess of Par— Common Stock will be credited with $30,000; $1,000,000; $970,000, respectively.

Step-by-step solution

The information provided in the question

Bonds outstanding $2,000,000 (2000* $1,000)

Unamortized discount $30,000

Convertible into 50 shares of $10 par value

Journal Entry

Date	Description	DEBIT	CREDIT
	Bonds Payable	$2,000,000
	Discount on Bonds Payable		$30,000
	Common Stock (2,000 X 50 X $10)		$1,000,000
	Paid-in Capital in Excess of Par— Common Stock		$970,000
	Being Bonds are converted into common stock