Bluebell Corporation has outstanding convertible bonds with a face value of $9,000. It has just paid interest on these bonds, and the bonds have a book value of $9,500. Each $1,000 bond is convertible into 30 shares of common stock (par value $20 per share). All of the bonds are converted into common stock when the market value of Bluebell's common stock is $25 per share. Under the market value method, what value would be given to additional paid-in capital from bond conversion?

Question

contestada

Respuesta :

JenelleTeeters JenelleTeeters · Answer 1 · 2020-08-21T05:15:44+02:00

Answer:

$900

Explanation:

As provided, we need to use the market value method.

Face value of bonds to be converted = $9,000

Further for each $1,000,

30 shares shall be issued.

Total number of shares to be issued =[tex]\frac{9,000}{1,000}\times 30[/tex] = 180 shares.

Market value of share = $25 per share

Par value = $20

Additional paid in value for each share = $25 - $20 = $5

Thus, on conversion

Paid in capital = [tex]180 shares \times 20 dollars each = 3,600 dollars[/tex]

Additional paid-in capital = 180 shares [tex]\times[/tex] $5 each = $900