Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 14, Problem 14.18E
a.
To determine
To prepare: The
b.
To determine
To prepare: The journal entry to record issuance of the bonds assuming warrants as detachable using proportionate method.
c.
To determine
To prepare: The journal entry to record issuance of bonds assuming that the warrants are detachable using the incremental method.
d.
To determine
To prepare: Journal using proportionate method for recording exercise of all warrants.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
In 2015, The Platinum Company issued $700,000 8% bonds with 700 nondetachable warrants for $765,000 cash. Each warrant entitled the holder to buy 100 shares of The Platinum Company’s $2 par common stock at $20 per share and required surrender of the attached $1,000 bond. On March 2, 2021, all The Platinum Company bondholders exercised their warrants for new shares and forfeited the bonds when shares were trading at $40 per share. On March 2, 2021, the unamortized premium on the bonds was $25,000.
Prepare the necessary journal entry for the bond conversion on March 2, 2021 Assume that The Platinum Company uses the market method to record the stock issuances.
A company issues 1,000 bonds, each with a face value of $1,000, for $1.1 million. Each bond has a detachable warrant that allows the holder to purchase common stock for $20 per share. The market value of the bonds without the warrants is $950,000. The fair market value of the warrants is $50,000.How much should the company record as the value of the warrants?
Hoffman Corporation issued $60 million of 5%, 20-year bonds at 102. Each of the 60,000 bonds was issued with 10 detachable stock warrants, each of which entitled the bondholder to purchase, for $20, one share of $1 par common stock. At the time of sale, the market value of the common stock was $25 per share and the market value of each warrant was $5. Prepare the journal entry to record the issuance of the bonds.
Chapter 14 Solutions
Intermediate Accounting (2nd Edition)
Ch. 14 - What conditions or terms does a note payable...Ch. 14 - If the market rate of interest exceeds the face or...Ch. 14 - What is included in bond issue costs and how...Ch. 14 - Prob. 14.4QCh. 14 - When a bond is issued at a discount, will its...Ch. 14 - Prob. 14.6QCh. 14 - Prob. 14.7QCh. 14 - Under IFRS, how do firms account for convertible...Ch. 14 - Prob. 14.9QCh. 14 - Can companies reclassify short-term debt expected...
Ch. 14 - Under IFRS, can companies reclassify short-term...Ch. 14 - Do companies always reclassify long-term debt that...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Prob. 14.15QCh. 14 - Prob. 14.16QCh. 14 - Prob. 14.1MCCh. 14 - Prob. 14.2MCCh. 14 - Prob. 14.3MCCh. 14 - Prob. 14.4MCCh. 14 - Prob. 14.5MCCh. 14 - Clothes Horse Corp. (CHC) Issued 500,000 bonds due...Ch. 14 - Prob. 14.7MCCh. 14 - Prob. 14.8MCCh. 14 - Prob. 14.9MCCh. 14 - Prob. 14.10MCCh. 14 - Prob. 14.11MCCh. 14 - Prob. 14.1BECh. 14 - Notes Payable. Using the information provided in...Ch. 14 - Prob. 14.3BECh. 14 - Prob. 14.4BECh. 14 - Prob. 14.5BECh. 14 - Prob. 14.6BECh. 14 - Bond Terminology. Match each term with its...Ch. 14 - Bond Pricing. Fill in the missing items for each...Ch. 14 - Prob. 14.9BECh. 14 - Bond Issue Price. Using the information from...Ch. 14 - Prob. 14.11BECh. 14 - Prob. 14.12BECh. 14 - Prob. 14.13BECh. 14 - Prob. 14.14BECh. 14 - Prob. 14.15BECh. 14 - Prob. 14.16BECh. 14 - Prob. 14.17BECh. 14 - Prob. 14.18BECh. 14 - Bonds Issued between Interest Payment Dates. For...Ch. 14 - Prob. 14.20BECh. 14 - Prob. 14.21BECh. 14 - Prob. 14.22BECh. 14 - Prob. 14.23BECh. 14 - Prob. 14.24BECh. 14 - Prob. 14.25BECh. 14 - Prob. 14.26BECh. 14 - Prob. 14.27BECh. 14 - Prob. 14.28BECh. 14 - Prob. 14.29BECh. 14 - Prob. 14.30BECh. 14 - Short-Term Debt Expected to Be Refinanced, IFRS....Ch. 14 - Prob. 14.32BECh. 14 - Prob. 14.33BECh. 14 - Prob. 14.34BECh. 14 - Prob. 14.35BECh. 14 - Fair Value Option. Saratoga Company issued bonds...Ch. 14 - Prob. 14.37BECh. 14 - Financial Statement Disclosure. Use the following...Ch. 14 - Prob. 14.1ECh. 14 - Prob. 14.2ECh. 14 - Prob. 14.3ECh. 14 - Prob. 14.4ECh. 14 - Prob. 14.5ECh. 14 - Bond Issue, Interest Payments, Effective Interest...Ch. 14 - Prob. 14.7ECh. 14 - Prob. 14.8ECh. 14 - Prob. 14.9ECh. 14 - Prob. 14.10ECh. 14 - Prob. 14.11ECh. 14 - Prob. 14.12ECh. 14 - Convertible Bonds, Conversion. On January 1, 2018,...Ch. 14 - Convertible Bonds, Conversion. Using the...Ch. 14 - Prob. 14.15ECh. 14 - Prob. 14.16ECh. 14 - Prob. 14.17ECh. 14 - Prob. 14.18ECh. 14 - Warrants. DHC Associates issued 2,100 of its...Ch. 14 - Prob. 14.20ECh. 14 - Prob. 14.21ECh. 14 - Prob. 14.1PCh. 14 - Long-Term Notes Payable, Semiannual Interest,...Ch. 14 - Note Payable Issued at a Discount with...Ch. 14 - Prob. 14.4PCh. 14 - Prob. 14.5PCh. 14 - Bond Issue, Interest Payments, Effective Interest...Ch. 14 - Prob. 14.7PCh. 14 - Bonds Sold between Interest Dates at a Discount,...Ch. 14 - Prob. 14.9PCh. 14 - Prob. 14.10PCh. 14 - Convertible Bonds, Bond Issue Costs, Conversion....Ch. 14 - Prob. 14.12PCh. 14 - Prob. 14.13PCh. 14 - Prob. 1JCCh. 14 - Prob. 2JCCh. 14 - Prob. 3JCCh. 14 - Prob. 1FSCCh. 14 - Prob. 1SSCCh. 14 - Surfing the Standards Case 2: Bonds with...Ch. 14 - Prob. 1BCC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- In April 2007, Blood corporation issued 3,000,000 of 10% nonconvertible bonds at 102 that are due on March 31, 2013. Each 1000 bond was issued with 40 detachable stock warrants, each of which entitled the bondholders to purchase one share of Blood 10 par ordinary share for 25. On April 1, 2007, the market value of the bonds ex-warrant was 97. What is the assigned value of the ordinary stock warrants?arrow_forwardCataloochee Inc. issues bonds, each with one detachable warrant, for $392,000. The bonds are 400, $1,000 6% bonds and they trade at 97 without the warrants. On the day of issue, the fair value of the stock is $45 and the par value is $1. The strike price of the warrants is $25. What is the amount of the entry to record the Stock Warrants?arrow_forwardHowat Corporation earned $360,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $15 per share during the period. Also outstanding were 15,000 warrants that could be exercised to purchase one share of common stock for $10 for each warrant exercised. Instructions a. Are the warrants dilutive? b. Compute basic earnings per share. c. Compute diluted earnings per share.arrow_forward
- On January 1, 2020, Safety Company issued 10,000 P1,000 bonds with 10% stated interest payable every yearend for five years. Each bond carries rights to purchase 50 P10-par ordinary shares of Safety for P14 each. The market rate of interest ex-warrants is 12%.On December 29, 2021, some of the bondholders exercised their share warrants. When preparing the 2021 financial statements, however, the cash records were found to be included among those which were burnt from a firework incident during the New Year celebration.Upon inspection of your accounting clerk, he found the following recordings in the Shareholders' Equity.• The Share Capital increased by P3,000,000 as a result of the exercise of warrants.• The Share Premium - Issuance account increased by P1,392,720 as a result of the exercise of warrants.• The Share Warrants Outstanding account had a remaining balance of P128,480 after the exercise of warrants. a. How much is the net increase/decrease in the Shareholders' Equity during…arrow_forwardBarbie originally issued 5,000,000 face value bonds at 105 or a premium of 250,000. Subsequently, the entity reacquired 1, 000,000 face value bonds to be placed in the treasury at 103. At the time of the reacquisition, the unamortized premium balance is 200,000, and accrued interest on the treasury bonds is 30,000 which is paid in cash. How much should be the book value of the bonds after the reacquisition of the bonds as treasury?arrow_forwardOn December 31, 20X5. Cobb issued 2,000 of its 10%, $1,000 bonds at 99. The issuance price established a bond discount of $20,000. In connection with the sale of these bonds. Cobb paid the following expenses: Legal and accounting fees $45,000 Printing of the prospectus $55,000 Underwriting fees $85,000 In Cobb's December 31, 20X5, balance sheet, bond issue costs totalarrow_forward
- Fortune company had 300,000 ordinary shares outstanding on January 1, 20B. In addition on January 1, 20B, the entity had issued 6,000 convertible 10% bonds with P1,000 face value. The entity has no other potentially dilutive securities. The bonds were converted on October 1, 20B and 40 ordinary shares were issued in exchange for each bond. Accrued interest on the bonds was recognized and paid on that date. Net income for 20B was P7,500,000. The income tax rate is 30%. What is the amount of diluted earnings per share? 14.47 21.65 14.72 14.61arrow_forwardFermin company had 200,000 ordinary shares outstanding on January 1. In addition, as of January 1, the company had issued 4,000 convertible 10% bonds with 1,000 face value. The company has no other potentially dilutive securities. The bonds were converted on October 1 and 40 ordinary shares were issued in exchange for each bond. Accrued interest on the bonds was recognized and paid on that date. Net income for the year was 5,000,000. The income tax rate is 30%. a. What is the amount of basic earnings per share? b. What is the amount of diluted earnings per share?arrow_forwardOn May 1, 2022, Marly Co. issued €500,000 of 7% bonds at 103, which are due on April 30, 2032. Twenty detachable stock warrants entitling the holder to purchase for €40 one share of Marly’s ordinary shares €15 par value, were attached to each €1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2022, the fair value of Marly’s shares was €35 per share and of the warrants was €2. On May1, 2022, Marly should record bonds payable at ....arrow_forward
- A company issued $400,000 of 7% bonds at 102. One detachable stock warrant entitling the holder to purchase one share of common stock was attached to each $1,000 bond. On the day of this issuance, the bonds without the warrants would sell at 95, the fair value of the warrant was $300 per warrant. How much Discount/Premium on Bonds Payable should be recorded for this issuance? (Just enter an amount. Do not put a plus or minus sign in front of the amount.)arrow_forwardEhrlich Corporation earned $360,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $15 per share during the period. Also outstanding were 15,000 warrants that could be exercised to purchase one share of common stock for $10 for each warrant exercised.Instructions a. Are the warrants dilutive? b. Compute basic earnings per share. c. Compute diluted earnings per share.arrow_forwardDuring 20x9, Oceanic Co. Issued 3,000 of its 9%, ₱1,000 face value bonds at 1011/2. In connection with the sale of these bonds, Oceanic paid the following expenses: Promotion costs ₱20,000 Engraving and printing 25,000 Underwriter’s commissions 200,000 What amount should Oceanic record as bond issue costs to be amortized over the term of the bonds?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning