Tree Company has 80000par value 10 12year convertible bonds

Tree Company has 80,000(par value),, 10% 12-year convertible bonds outstanding. These bonds were sold at face value and pay annual interest on December 31 of each year. Each $1,000 bonds is convertible into 40 shares of Tree $4 par value common stock. On December 31, 2017 after the bond interest has been paid, $30,000 par value of bonds(30 bonds) were converted.

Solution

Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-17 Convertible Bonds Payable    30,000.00    Common Stock      4,800.00 30 Bonds x 40 Shares X $4    Additional Paid-in Capital in Excess of Par    25,200.00 $30,000 - $4,800 (To record the conversion of Bonds into Common Stock)