P3 On 612017 Warrior converted 2000 shares of its convertibl

P3. On 6/1/2017, Warrior converted 2,000 shares of its convertible bond to 20,000 shares of its common stock. The following information pertains to the above-mentioned transaction: B/P 2,000,000, Premium on B/P- 150,000, Par value of C/S- $100/share, Market value of C/S- $16/share Instructions: prepare any necessary journal entries for the conversion using the Market value method

Solution

Journal Entry for Conversion of bonds into Shares.

Date	Accounts Title and Explanation	Debit	Credit
6/1/2017	Bonds Payable	$2000000
	Premium on Bonds Payable	$150000
	Discount on common stock ($100 - $16)*20000 shares	$1680000
	Profit on conversion (Balancing figure)		$1830000
	Common stock ($100*20000 shares)		$2000000
	(Being Bonds converted into shares)