Answer: 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
