On July 1, Salem Corporation issued $1,200,000 of 7% bonds due in 10 years. The bonds...
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On July 1, Salem Corporation issued $1,200,000 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 warrants at the time of issuance was $60,000. The bonds would sell without warrants at $ $1,164,000. a. Record the entry for issuance of bonds using the proportional method. Note: Carry all decimals in calculations; round the final answer to the nearest dollar. Date July 1 Cash Date July 1 Account Name Inventory Equipment To record bond issuance. Cash Check b. Record the entry for issuance of bonds assuming instead that the warrants are not detachable. Account Name Debit Interest Payable Bonds Payable To record bond issuance, 0 0 0 0 Debit 1212.000 Credit 0 0 0x 03 0x 0x Credit 0✔ 48,000 * 1164,000 x On July 1, Salem Corporation issued $1,200,000 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 warrants at the time of issuance was $60,000. The bonds would sell without warrants at $ $1,164,000. a. Record the entry for issuance of bonds using the proportional method. Note: Carry all decimals in calculations; round the final answer to the nearest dollar. Date July 1 Cash Date July 1 Account Name Inventory Equipment To record bond issuance. Cash Check b. Record the entry for issuance of bonds assuming instead that the warrants are not detachable. Account Name Debit Interest Payable Bonds Payable To record bond issuance, 0 0 0 0 Debit 1212.000 Credit 0 0 0x 03 0x 0x Credit 0✔ 48,000 * 1164,000 x
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Answer rating: 100% (QA)
Market value of bonds Market value of warrants 116400... View the full answer
Related Book For
Intermediate Accounting Volume 2
ISBN: 9781119497042
12th Canadian Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy
Posted Date:
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