ABC Co. is authorized to issue 1,000,000 ordinary shares with a $5 par value and 100,000, 6% preference shares with a $20 par value. The company is considering financing a large expansion project that is expected to bring sustainable growth to the company. The company’s investment banker has suggested that the company takes advantage of both equity and debt financing. He proposed that the company sells securities to investors called HYBRID. Each unit of HYBRID consists of: (1) a $1,000 face value, 10% stated rate, 5-years bond, which pays interest annually, and (2) 20 ordinary shares. On January 1, 2017, the company issued 500 units of HYBRID for a price of $1,200 per unit. The company paid 50 units of HYBRID to the Investment banker as underwriting fees. Assume that the effective market rate was 12% and that ordinary shares have an appraisal value of $15 per share Prepare the necessary journal entry(ies) to record the issue of HYBRID units on January 1, 2017.
ABC Co. is authorized to issue 1,000,000 ordinary shares with a $5 par value and 100,000,
6%
expansion project that is expected to bring sustainable growth to the company. The
company’s investment banker has suggested that the company takes advantage of both
equity and debt financing. He proposed that the company sells securities to investors
called HYBRID. Each unit of HYBRID consists of: (1) a $1,000 face value, 10% stated rate,
5-years bond, which pays interest annually, and (2) 20 ordinary shares. On January 1,
2017, the company issued 500 units of HYBRID for a price of $1,200 per unit. The
company paid 50 units of HYBRID to the Investment banker as underwriting fees. Assume
that the effective market rate was 12% and that ordinary shares have an appraisal value
of $15 per share
Prepare the necessary
1, 2017.
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