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 recorded Share Premium—Conversion Equity of $50,000. The company records the conversion as follows.

Four years after issue, debentures with a face value of $1,000,000 and

Discuss the propriety of this accounting treatment.

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First the company will record the reduction in the bonds payable account This is the face value of the debentures minus the book value of the debentur... View full answer

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