Dakar IncHas $3,000,000 (Par Value), 8% Convertible Bonds Outstanding

Multiple Choice

Dakar Inc.has $3,000,000 (par value) , 8% convertible bonds outstanding.Each $1,000 bond is convertible into thirty no par value common shares.The bonds pay interest on January 31 and July 31.On July 31, 2017, the holders of $900,000 worth of bonds exercised the conversion privilege.On that date the market price of the bonds was 105, the market price of the common shares was $36, the carrying value of the common shares was $18 and the Contributed Surplus-Conversion Rights account balance was $450,000.The total unamortized bond premium at the date of conversion was $210,000.Using the book value method, Dakar should record, as a result of this conversion,

A) a credit of $135,000 to Contributed Surplus-Conversion Rights.
B) a debit of $135,000 to Contributed Surplus-Conversion Rights.
C) a credit of $63,000 to Bonds Payable.
D) a debit of $210,000 to Bonds Payable.