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    Nina22's Avatar
    Nina22 Posts: 1, Reputation: 1
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    #1

    Apr 8, 2007, 02:17 PM
    Convertible Bonds and Stock Warrants
    I need help with a homwork problem on convertible bonds and stock warrants. I need to present the entries required to record the bond transactions.
    On Aug 1st 2004, Ryan Corp called its 10% convertible bonds for conversion. The 6,000,000 par bonds were converted into 240,000 shares of 20 par common stock. On Aug 1st there was 525,000 of umamoritzed premium applicable to the bonds. The fair market value of the common stock was $20 per share. Ignore all interest payments.
    Can anyone help me?
    santys72's Avatar
    santys72 Posts: 7, Reputation: 2
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    #2

    Oct 16, 2007, 10:39 AM
    Using the Book Value Method:

    Dr: Bonds Payable $6,000,000
    DR: Discount $525,000
    Cr: Common Stock $4,800,000
    Cr: APIC $1,725,000


    You have to eliminate the bonds and unamortized premium still outstanding. Then credit common Stock (par) for stcok acquired. The difference plug in as Additional Paid in Capital
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