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Book-value method of accounting for convertible debt

The stock is recorded at the book value of debt. The convertible debt is removed at the book value, the number of share times par is added to the stock account, and the remaining amount is plugged in to additional paid in capital. Contrast with the market value in which the new stocks are recorded at the market value of the new share, and any difference between that amount and the book value of the debt is a gain or loss.

 

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