Asked by drishika gulati on Jun 16, 2024
Verified
When bonds are converted into common stock the carrying value of the bonds is transferred to paid-in capital accounts.
Paid-In Capital Accounts
Funds raised by a company through the sale of equity or stock, representing the capital contributed by investors in exchange for shares.
Carrying Value
The value of an asset listed in a company's financial records, determined by subtracting its accumulated depreciation from its initial purchase price.
Common Stock
Common stock represents ownership shares in a corporation, entitling holders to vote on corporate matters and potentially receive dividends.
- Comprehend how bonds are converted into common stock, including the accounting treatment and the impact on financial statements.
Verified Answer
AG
Angel GarciaJun 21, 2024
Final Answer :
True
Explanation :
When bonds are converted into common stock, the carrying value of the bonds is transferred to the paid-in capital accounts, not retained earnings or any other accounts. This transfer is done on the date of conversion and reflects the additional paid-in capital that the company receives due to the bondholders converting their bonds into equity ownership.
Learning Objectives
- Comprehend how bonds are converted into common stock, including the accounting treatment and the impact on financial statements.