On July 1 2017 Crane Ltd issued 1000 convertible fiveyear 10

On July 1, 2017, Crane Ltd. issued 1,000 convertible, five-year, $1,000 bonds. Each bond is convertible into 20 common shares at the bondholder\'s option. On the date of conversion rights were valued at $53,000

On July 1, 2020, the bonds had a carrying value on Crane\'s books of $969,000, and the fair market value of the bonds without the convertible option was $977,000.

assume all the bondholders voluntarily decided to convert their bonds to common shares on July 1, 2020

prepare the journal entry to record the conversion

Account Titles and Explanation Debit Credit

Solution

Date Account titles & Explanation Debit Credit July 1, 2020 Bonds Payables   A/c $969,000 Contributed Surplus - Conversion Rights $53,000           To Common Shares A/c $1,022,000 (Being Bond Holders convert their Bonds to common stock Fully)