Question

Pete Corp. issued $30 million of 7%, 15-year convertible bonds at 102 on January 1, 2021. The bonds pay interest semiannually each June 30 and December 31. Each $1,000 bond is convertible into 50 shares of Pete's no par common stock. Pete recently issued similar, but non-convertible, bonds at 98.  

61 % of the bonds were converted when the common stock had a price of $23/share and the remaining premium was $0.2 million ($200,000).

For what amount would Pete credit Common Stock when 61% of the bonds are converted?

Enter in dollars (e.g. enter $10 million as 10,000,000).

Answer 1

Convertible bonds issued in par amount	$               30	million
Divided by: face amount per bonds	$         1,000	per bond
Number of bonds issued	0.03000	million
Number of bonds issued	0.03000	million
Multiply: percentage of bonds converted	61%
Number of bonds converted	0.01830	million
Multiply: conversion rate to equity	50	shares
Number of common shares converted	0.91500	million
Multiply: market price per share	23	per share
Credited to Common Stock	$      21.045	million