Accounting for Convertible Bonds

This video is a lesson on how to recording journal entries for convertible bonds when they are converted to stock.  There would be a journal entry to debit bonds payable in the amount of stock granted.  Therefore, the common stock line item would be credited by t

This video is a lesson on how to recording journal entries for convertible bonds when they are converted to stock.  There would be a journal entry to debit bonds payable in the amount of stock granted.  Therefore, the common stock line item would be credited by the same amount; however, the value of this stock will most likely be higher than the value of the convertible bonds and this difference will be recorded as a credit to the "Paid in Capital" line item. 

The convertible bond in this example was a discount bond and the speaker discusses how to account for the value of the discount relative to the actual bonds converted to stock.