Arco, Inc. issued $300,000 of 4%, 10-year convertible bonds at par on July 1, 2022. Each bond has a par value of $1000. The bonds include the option for bondholders to convert each bond into 50 $1 par value shares of common stock beginning two years after the date of issue. The market price of the stock at the time of issue is $25 per share and the beneficial conversion option is valued at $75,000. On July 2, 2024, when the market price of the stock is $35 and the balance in the Discount account is $66,000, all of the bondholders convert the bonds. What is the proper entry to record the conversion of the bonds? Group of answer choices Date Account Debit Credit July 2, 2024 Bonds Payable 300,000 Discount on Bonds Payable 75,000 Common Stock, $1 par, 15,000 shares 300,000 Add. Paid-in Capital—Bene. Conv. Option 75,000 Date Account Debit Credit July 2, 2024 Bonds Payable 300,000 Add. Paid-in Capital—Bene. Conv. Option 75,000 Discount on Bonds Payable 66,000 Common Stock, $1 par, 15,000 shares 15,000 Add. Paid-in Capital in Excess of Par- Common 294,000 Date Account Debit Credit July 2, 2024 Bonds Payable 300,000 Discount on Bonds Payable 66,000 Common Stock, $1 par, 15,000 shares 15,000 Add. Paid-in Capital in Excess of Par- Common 351,000 Date Account Debit Credit July 2, 2024 Bonds Payable 300,000 Beneficial Conversion Option 60,000 Discount on Bonds Payable 66,000 Add. Paid-in Capital in Excess of Par- Common 294,000
Arco, Inc. issued $300,000 of 4%, 10-year convertible bonds at par on July 1, 2022. Each bond has a par value of $1000. The bonds include the option for bondholders to convert each bond into 50 $1 par value shares of common stock beginning two years after the date of issue. The market price of the stock at the time of issue is $25 per share and the beneficial conversion option is valued at $75,000. On July 2, 2024, when the market price of the stock is $35 and the balance in the Discount account is $66,000, all of the bondholders convert the bonds. What is the proper entry to record the conversion of the bonds? Group of answer choices Date Account Debit Credit July 2, 2024 Bonds Payable 300,000 Discount on Bonds Payable 75,000 Common Stock, $1 par, 15,000 shares 300,000 Add. Paid-in Capital—Bene. Conv. Option 75,000 Date Account Debit Credit July 2, 2024 Bonds Payable 300,000 Add. Paid-in Capital—Bene. Conv. Option 75,000 Discount on Bonds Payable 66,000 Common Stock, $1 par, 15,000 shares 15,000 Add. Paid-in Capital in Excess of Par- Common 294,000 Date Account Debit Credit July 2, 2024 Bonds Payable 300,000 Discount on Bonds Payable 66,000 Common Stock, $1 par, 15,000 shares 15,000 Add. Paid-in Capital in Excess of Par- Common 351,000 Date Account Debit Credit July 2, 2024 Bonds Payable 300,000 Beneficial Conversion Option 60,000 Discount on Bonds Payable 66,000 Add. Paid-in Capital in Excess of Par- Common 294,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Arco, Inc. issued $300,000 of 4%, 10-year convertible bonds at par on July 1, 2022. Each bond has a par value of $1000. The bonds include the option for bondholders to convert each bond into 50 $1 par value shares of common stock beginning two years after the date of issue. The market price of the stock at the time of issue is $25 per share and the beneficial conversion option is valued at $75,000. On July 2, 2024, when the market price of the stock is $35 and the balance in the Discount account is $66,000, all of the bondholders convert the bonds. What is the proper entry to record the conversion of the bonds?
Group of answer choices
| Date | Account | Debit | Credit |
| July 2, 2024 | Bonds Payable | 300,000 | |
| | Discount on Bonds Payable | 75,000 | |
| | Common Stock, $1 par, 15,000 shares | 300,000 | |
| | Add. Paid-in Capital—Bene. Conv. Option | | 75,000 |
| Date | Account | Debit | Credit |
| July 2, 2024 | Bonds Payable | 300,000 | |
| | Add. Paid-in Capital—Bene. Conv. Option | 75,000 | |
| | Discount on Bonds Payable | 66,000 | |
| | Common Stock, $1 par, 15,000 shares | | 15,000 |
| | Add. Paid-in Capital in Excess of Par- Common | | 294,000 |
| Date | Account | Debit | Credit |
| July 2, 2024 | Bonds Payable | 300,000 | |
| | Discount on Bonds Payable | 66,000 | |
| | Common Stock, $1 par, 15,000 shares | 15,000 | |
| | Add. Paid-in Capital in Excess of Par- Common | | 351,000 |
| Date | Account | Debit | Credit |
| July 2, 2024 | Bonds Payable | 300,000 | |
| | Beneficial Conversion Option | 60,000 | |
| | Discount on Bonds Payable | | 66,000 |
| | Add. Paid-in Capital in Excess of Par- Common | | 294,000 |
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education