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How should richmond co account for conversion of bonds

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Reference no: EM132508660

Richmond Co. sold convertible bonds at a premium. Interest is paid on May 31 and November 30. On May 31, after interest was paid, 100, $1,000 bonds are tendered for conversion into 3,000 shares of $10 par value ordinary shares that had a market price of $40 per share.

Question 1: How should Richmond Co. account for the conversion of the bonds into ordinary shares under the book value method? Discuss the rationale for this method.

Reference no: EM132508660

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