Exhibit 14-14
Marley, Inc. sold $500,000 of its ten-year 8% bonds at 96 on January 1, 2014. Interest is paid each January 1 and July 1 and straight-line amortization is used. Each $1,000 bond is convertible into 100 shares of $10 par common stock. One-half of the bonds were converted on January 1, 2019, when the market value of the stock was $14 per share.
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Refer to Exhibit 14-14. The entry to record the conversion using the book value method would include a
A. debit to Loss on Conversion for $5,000.
B. debit to Retained Earnings for $5,000.
C. debit to Discount on Bonds Payable for $5,000.
D. credit to Additional Paid-in Capital from Bond Conversion for $5,000.
Answer: B
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