Total unamortized bond premium at the date of conversion


Jenks Co. has $2,500,000 of 8% convertible bonds outstanding. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2007, the holders of $800,000 bonds exercised the conversion privilege. On that date the market price of the bonds was 105 and the market price of the common stock was $36. The total unamortized bond premium at the date of conversion was $175,000. Jenks should record, as a result of this conversion, a:

a) credit of $136,000 to Paid-in Capital in Excess of Par.

b) credit of $120,000 to Paid-in Capital in Excess of Par.

c) credit of $56,000 to Premium on Bonds Payable.

d) loss of $8,000.

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Accounting Basics: Total unamortized bond premium at the date of conversion
Reference No:- TGS076197

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