Which treatment best reflects the effect of the transaction

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Question: In accounting for the conversion of convertible bonds to common stock, most firms record the issue of shares at the amount of the book value of the bonds. The issue of the shares could be recorded at their market value, with the difference between the market value of the shares and the book value of the bonds recorded as a loss on the conversion. Which treatment best reflects the effect of the transaction on the wealth of the existing shareholders?

Reference no: EM131490778

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