Question: Four years after issue, debentures with a face value of $1,000,000 and book value of $960,000 are tendered for conversion into 80,000 ordinary shares immediately

Four years after issue, debentures with a face value of $1,000,000 and book value of $960,000 are tendered for conversion into 80,000 ordinary shares immediately after an interest payment date. At that time, the market price of the debentures is 104, and the ordinary shares are selling at $14 per share (par value $10). At date of issue, the company needed Share Premium??Conversion Equity of $50,000. The company records the conversion as follows.

Discuss the propriety of this accountingtreatment.

Bonds Payable Share Premium-Conversion Equity Share Capital -Ordinary Share Premium-Ordinary 960,000 50,000 800,000 210,000

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