Problem:
Madison Corporation had two issues of securities outstanding - Common stock and a 5 percent convertible bond issue in the face amount of $10,000,000. Interest payment dates of the bond issue are June 30th and December 31st. The conversion clause in the bond indenture entitles the bondholders to receive 40 shares of $20 par value common stock in exchange for each $1000 bond.
On June 30th 2011, the holders of $1,800,000 face value bonds excercised the conversion privilege. The market price of the bonds on that date were $1,100 per bond and market price of the common stock was $35. The total unamortized bond discount at the date of conversion was $500,000. What amount should Madison credit to the account "Paid-in capital in excess of par" as a result of this conversion assuming Madison doesn't want to recognize any gain or loss on the conversion?