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On September 1, 2014, Oxford Corp. sold at 102 (plus accrued interest) 5,200 of its $1,000 face

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On September 1, 2014, Oxford Corp. sold at 102 (plus accrued interest) 5,200 of its $1,000 face value, 10-year, 9%, non-convertible bonds with detachable stock warrants. Each bond carried two detachable warrants; each warrant was for one common share at a specified option price of $10 per share. Shortly after issuance, the warrants were selling for $5 each. Assume that no fair value is available for the bonds. Interest is payable on December 1 and June 1. Oxford Corp. prepares its financial statements in accordance with ASPE.
Instructions
(a) Prepare in general journal format the entry to record the issuance of the bonds under both options available under ASPE.
(b) From the perspective of a creditor, discuss the effect of each option on Oxford Corp.'s debt to total assets ratio.
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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a ASPE allows for two options 1 to allocate the entire issuance to the debt component or 2 to use th...View the full answer


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