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##### Reference no: EM13144191

Jenks Co. has \$2,500,000 of 8% convertible bonds outstanding. Each \$1,000 bond is convertible into 30 shares of \$30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2007, the holders of \$800,000 bonds exercised the conversion privilege. On that date the market price of the bonds was 105 and the market price of the common stock was \$36. The total unamortized bond premium at the date of conversion was \$175,000. Jenks should record, as a result of this conversion, a

a) credit of \$136,000 to Paid-in Capital in Excess of Par.

b) credit of \$120,000 to Paid-in Capital in Excess of Par.

c) credit of \$56,000 to Premium on Bonds Payable.

d) loss of \$8,000.

#### Questions Cloud

 Calculate the specific heat capacity of the metal in j/g°c : If 69.5 kJ of heat is applied to a 1034 g block of metal, the temperature of the metal increases by 11.4°C. Calculate the specific heat capacity of the metal in J/g°C. What is the company times interest earned ratio : Tree Frog Company is organized as a LLC and pays no income taxes. The company has fixed interest expense of \$5,750, Sales of \$253,000 and variable expenses of \$189,750. What is the company's times interest earned ratio? What considerations should the owners make in termination : What considerations should the owners make in this termination? Should they consider making an S election and then later, terminating the S corporation? If you were their tax advisor, what would you recommend? Calculate the specific heat capacity of the metal in j/g°c : If 69.5 kJ of heat is applied to a 1038 g block of metal, the temperature of the metal increases by 11.4°C. Calculate the specific heat capacity of the metal in J/g°C. Total unamortized bond premium : On that date the market price of the bonds was 105 and the market price of the common stock was \$36. The total unamortized bond premium at the date of conversion was \$175,000. Jenks should record, as a result of this conversion What is an inadvertent termination of an s election : What is an inadvertent termination of an S election? How does an S corporation and its shareholders rectify an inadvertent termination? What could happen if a company fails to rectify the termination? Discuss factors or conditions that contribute : Discuss factors or conditions that contribute to such a possibility. How can additional information and supplementary data (beyond financial statements) help prevent this possibility? Identification of framework used for evaluating control : Management's assessment of the operating effectiveness for the period from the beginning to the end of the fiscal year under audit. Identification of framework used for evaluating internal control. What is the variable cost per unit : Average cost per unit is \$1.425 at the 16000 unit level of activity and \$1.38 at the 20000 unit level of activity. What is the variable cost per unit? The total fixed cost per unit?

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