iny shares vith a carrying value of 549,000 is converted into S1o par valiue com
ID: 2430053 • Letter: I
Question
iny shares vith a carrying value of 549,000 is converted into S1o par valiue comnon oa for each $1,000 bond. The entry to be recorded on the conversion of bonds is a. Bonds Payable 50,000 1,000 Loss on Retirement of Bonds Unamortised Bond Discount Common Stock 1,000 51,000 b. Bonds Payable 50,000 Common Stock Additional Paid-In Capital 25 25,000 c. Bonds Payable 50,000 Common Stock Additional Paid-In Capital Unamortised Bond Discount a Ca $0.00 2510 25,000 24,000 1,000 d. Bonds Payable 49,000 1,000 Unamortised Bond Discount Common Stock Additional Paid-In Capital 25,000 25,000 e. none of the above If the indirect method is used to prepare a statement of cash flows, which of the following would be subtracted from net income to arrive at net cash flows from operating activities? a. Increase in accrued liabilities b. Increase in income taxes payable c. Increase in accounts receivable d. Decrease in prepaid expenses e. None of the above 28.Explanation / Answer
27. Answer - C
28. Answer - (C) Increase in accounts receivable
Explanation :
27. decrease in bonds payable, so it should be debited by $50,000
No. of common stock = ($50,000 / $1,000) x 50 = 2,500 shares
value of common stock = 2,500 x $10 = $25,000
Additional paid in capital = $49,000 - $25,000 = $24,000
Unamortised bond discount = $1,000
28. Increase in accounts receivable should be subtracted because it is a non cash transaction which won't affect cash position but it is included in net income.
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