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Question
A bond with a carrying value of $790,000 was converted into 100,000 shares of $5 per share par value common stock at a time when the market value per share was $9.00 per share. Which of the following statements does not accurately describe the financial accounting for the conversion?
A. A loss of $110,000 will be recognized if the market value method of recording the conversion is used.
B. Total owners' equity increases $790,000 if the market value method of recording the conversion is used.
C. Total owners' equity increases $790,000 if the book value method of recording the conversion is used.
D. Total owners' equity increases $900,000 if the market value method of recording the conversion is used.
Answer
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