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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Sale of Stock with Bonds Pilsen Company issues 12% bonds with a face value of $10,000 and 600 shares of $10 par common stock in a combined sale, receiving total proceeds of $23,000.

Required:

Record the transaction for each independent assumption shown:

  1. 1. The common stock has a current market value of $21 per share; the market value of the bonds is not known.
  2. 2. The common stock has a current market value of $24.50 per share; the bonds are selling at 98.

1.

To determine

Prepare the journal entries to record the given transaction.

Explanation

Common stock: Common stock is the cash raised by the company by issuing common or ordinary shares to the stockholders. This is an investment for the shareholders for which they receive the dividends from the issuing company, and have voting rights.

Bonds: Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies

Prepare the journal entries to record the given transaction:

Account title and ExplanationPost Ref.

Debit

($)

Credit

($)

Cash  $23,000 
    Bonds payable  $10,000
    Premium on bonds payable ($10,400$10,000)  $400
    Common stock, $10 par (600×

2.

To determine

Prepare the journal entries to record the given transaction.

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