7. 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). The company records the conversion as follows.

Bonds Payable 960,000 Share Premium—Conversion Equity 10,000 Share Capital—Ordinary 800,000 Share Premium—Ordinary 150,000 Discuss the propriety of this accounting treatment.