On July 1, 2020, Salem Corporation issued $2,600,000 of 7% bonds due in 10 years. The...

 

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On July 1, 2020, Salem Corporation issued $2,600,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually. Each $1,000 bond includes a detachable stock purchase warrant. Each warrant gives the bondholder the right to purchase, for $30, one share of $1 par value common stock at any time during the next 10 years. The bonds were sold at 101. The value of the stock purchase rights at the time of issuance was $130,000. The bonds would sell without warrants at $2,522,000. Required a. Record the entry for issuance of bonds using the proportional method. b. Record the entry for issuance of bonds assuming instead that the warrants are not detachable. • Note: List multiple debits or credits (when applicable) in alphabetical order. • Note: Round your answers to the nearest whole dollar. Date a. July 1, 2020 Account Name Cash Discount on Bonds Payable Bonds Payable Paid-in Capital-Stock Warrants b. July 1, 2020 Cash Bonds Payable Premium on Bonds Payable + # + + + + + Dr. 2,600,000 Cr. 2,600,000 On July 1, 2020, Salem Corporation issued $2,600,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually. Each $1,000 bond includes a detachable stock purchase warrant. Each warrant gives the bondholder the right to purchase, for $30, one share of $1 par value common stock at any time during the next 10 years. The bonds were sold at 101. The value of the stock purchase rights at the time of issuance was $130,000. The bonds would sell without warrants at $2,522,000. Required a. Record the entry for issuance of bonds using the proportional method. b. Record the entry for issuance of bonds assuming instead that the warrants are not detachable. • Note: List multiple debits or credits (when applicable) in alphabetical order. • Note: Round your answers to the nearest whole dollar. Date a. July 1, 2020 Account Name Cash Discount on Bonds Payable Bonds Payable Paid-in Capital-Stock Warrants b. July 1, 2020 Cash Bonds Payable Premium on Bonds Payable + # + + + + + Dr. 2,600,000 Cr. 2,600,000

Answer rating: 100% (QA)

Date Account Name Debit Credit July 12020 Cash 2600000101100 2626000 Discount on bonds payable 10272... View the full answer