On January 1, 2017, the $2,000,000 par value bonds of Spitz Company with a carrying value of $2,000,000 are converted to 1,000,000 shares of $1.00 par value common stock. Record the entry for the conversion of the bonds.

Please see answer in the explanation column

Explanation:

Journal entry for the conversion of the bonds to common stock on January 1st ,2017.

 Account                   Debit                                Credit    

Bonds payable      $2,000,000

Common stock                                                  $1,000,000

Paid in Capital in excess of par value             $1,000,000

When Bonds are converted to stock, the liability is no longer available, therefore bonds payable will be debited.

AT par $1 value, the share capital is $1,000,000 and the excess amount , Paid in capital in excess of par value becomes

 Bonds payable - Common stock = $2,000,000- $1,000,000 = $1,000,000

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