Culver Corp. has two issues of securities outstanding: no par value common shares and 8% convertible bonds witha par value of $8400000. Bond interest payment dates are June 30 and December 31. The conversion clause in thebond indenture entitles the bondholders to receive 40 common shares in exchange for each $1000 bond. Thevalue of the equity portion of the bond issue is $52000. On June 30, 2023, the holders of $1176000 par valuebonds exercise the conversion privilege. The market price of the bonds on that date is $1100 per bond and themarket price of the common shares is $36. The total unamortized bond discount at the date of conversion is$493000. In applying the book value method, what amount should Culver credit to Common Shares as a result ofthis conversion?$1252300O $1106980$1114260O $1099700

Carrying amount of bond Converted Calculation of Carrying value of all bondsParticulars…

Answered: $493000. In applying the book value…

$493000. In applying the book value method, what amount should Culver credit to Common Shares as a result of this conversion?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter7: Financial Activities

Section: Chapter Questions

Problem 10QE

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Question

Culver Corp. has two issues of securities outstanding: no par value common shares and 8% convertible bonds with
a par value of $8400000. Bond interest payment dates are June 30 and December 31. The conversion clause in the
bond indenture entitles the bondholders to receive 40 common shares in exchange for each $1000 bond. The
value of the equity portion of the bond issue is $52000. On June 30, 2023, the holders of $1176000 par value
bonds exercise the conversion privilege. The market price of the bonds on that date is $1100 per bond and the
market price of the common shares is $36. The total unamortized bond discount at the date of conversion is
$493000. In applying the book value method, what amount should Culver credit to Common Shares as a result of
this conversion?
$1252300
O $1106980
$1114260
O $1099700

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