Asked by Manal Al-Hashmi on Apr 29, 2024
Verified
Gains and losses are not recognized when convertible bonds are converted into common stock.
Convertible Bonds
Bonds that permit bondholders to convert them into common stock at the bondholders’ option.
Common Stock
A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.
- Identify and understand the characteristics and financial implications of convertible bonds and callable bonds.
Verified Answer
MR
Melony RaskinMay 03, 2024
Final Answer :
True
Explanation :
When convertible bonds are converted into common stock, gains and losses are not recognized because the transaction is considered a financing activity and not a disposal of assets or liabilities.
Learning Objectives
- Identify and understand the characteristics and financial implications of convertible bonds and callable bonds.