Answered: Which of the following would NOT be…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which of the following would NOT be included in the journal entry to show the conversion of bonds payable? ( NIE 13) A credit to gain on conversion credit to additional paid in capital debit to bond premium debit to bonds payable

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When a bond is converted into stock, the accounting entry typically involves debiting the bonds payable account for the face value of the bonds, debiting any unamortized discount (if applicable), and crediting the common stock or other equity account for the fair value of the stock issued. There would not be a debit to bond premium because the bond premium account is typically used to record the excess of the bond's issue price over its face value and is amortized over the life of the bond. Since the bond is being converted to equity, there is no longer any bond premium to amortize.

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