On January 1, 2016, Darth Corp. issued 50,000 of five-year, $1,000 bonds payable at 104. These bonds were each convertible into 100 shares of $10 par common stock. On January 1, 2019, Darth converted all of these bonds when the stock was selling at $11.50 a share.Required:Complete the matrix below to indicate the amounts that would be recorded for the indicated accounts in the journal entry to record the bond conversion. Then record the journal entry for the bond conversion.
?
Loss on
Additional
?
Bond Conversion
Paid-in Capital
?
(debit)
(credit)
?
?
?
Book value method
________
________
?
?
?
Market value method
________
________
What will be an ideal response?
?
| ? | Loss on | Additional |
| ? | Bond Conversion | Paid-in Capital |
| ? | (debit) | (credit) |
| Book value method | $ 0 | $ 800 |
| Market value method | 6,700 | 7,500 |
| Book Value Method | ? | ? | |
| Bonds Payable | 50,000 | ? | |
| Premium on Bonds Payablea | 800 | ? | |
| ? | Common Stock | ? | 50,000 |
| ? | Additional Paid-in Capital | ? | 800 |
| ? | ? | ? | |
| Market Value Method | ? | ? | |
| Bonds Payable | 50,000 | ? | |
| Premium on Bonds Payable | 800 | ? | |
| Loss on Conversion | 6,700 | ? | |
| ? | Common Stock | ? | 50,000 |
| ? | Additional Paid-in Capitalb | ? | 7,500 |
| ? | ? | ? | ? |
| a | $50,000 (.04)´2/5 = $800 | ? | ? |
| b | 50´100´$1.50 = $7,500 | ? | ? |
??
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