 Hello and welcome to this session in which we would look at a bond conversion example. Atom company has $2,000, $1,000 bond, each convertible into 50 shares of stock of $1 power value common stock. Simple English, I have 2,000 bonds. The conversion is 50 shares per bond. It means if I convert, I can possibly issue 100,000 new shares of stock. When the an amortized discount was 30,000, the bonds were converted into common stock. Well, what is my bonds payable? My bonds payable is 2 million. Now, how do I come up with this 2 million in bonds payable? Well, the number of shares, I'm sorry, the number of bonds times the face value of a thousand. Now, I also have a related discount on bonds of 30,000 that's giving to me. Now, the market value per common stock was 22,000. At the time of the conversion, use the book value to record this conversion. Book value means I'm not going to record any gain or loss. All what I'm doing is I'm removing my bonds and replacing my bonds with stocks. Before we proceed any further, I have a public announcement about my company, farhatlectures.com. Farhat accounting lectures is a supplemental educational tool. That's going to help you with your CPA exam preparation, as well as your accounting courses. My CPA material is aligned with your CPA review course such as Becker, Roger, Wiley, Gleam, Miles. My accounting courses are aligned with your accounting courses, broken down by chapter and topics. My resources consist of lectures, multiple choice questions, true-false questions, as well as exercises. Go ahead, start your free trial today, no obligation, no credit card required. Let's go ahead and start this process. If I'm removing my bonds payable, I have to debit bonds payable of 2 million. Therefore, bonds payable go down to zero. So that's my first entry. If I'm removing the bonds payable, I also have to remove discount on bonds because discount on bonds is a contra liability. Therefore, I'm going to have to credit 30,000 to remove discount on bonds. So the bonds are gone. What do I have to do next? Issue the stocks. Now, how do I issue the stocks? Well, it's the number of shares times the par value of a dollar. Therefore, I'm going to credit common stock for 100,000. Number of shares times the par value. Well, what's left? Well, what's left is always paid in capital common stock. And that number is a plug-in. It's the last number that I have to to book the entry for. It's 1,870,000. And what I did is I converted, I removed the bonds, I issued the stocks. And all what I did is change my finance structure from that to a liability. What should you do now? Go to Fahad lectures, look at additional MCQs through false exercises. That's going to help you, whether you are an accounting student, CPA candidate, CMA candidate, or looking to improve your accounting knowledge. Good luck, everyone. Study hard. And of course, stay safe.