On May 1, 2017, Concord Company issued 1,700 $1,000 bonds at 102. Each bond was issued...

On May 1, 2017, Concord Company issued 1,700 $1,000 bonds at 102. Each bond was issued with one detachable stock warrant. Shortly after issuance, the bonds were selling at 97, but the fair value of the warrants cannot be determined.

(a) Prepare the entry to record the issuance of the bonds and warrants.

(b) Assume the same facts as part (a), except that the warrants had a fair value of $23. Prepare the entry to record the issuance of the bonds and warrants.

Expert Solution

Answer

a
Account Title	Debit	Credit
Cash	$ 1,734,000		170010001.02
Discount on Bonds Payable	$ 51,000		17001000(1-0.97)
Bonds Payable		$ 1,700,000	1700*1000
Paid-in Capital—Stock Warrants		$ 85,000

b
	Debit	Credit
Cash	$ 1,734,000		170010001.02
Discount on Bonds Payable	$ 22,701
Bonds Payable		$ 1,700,000
Paid-in Capital—Stock Warrants		$ 56,701

Workings:
Market value of bonds without warrants	$ 1,649,000		170010000.97
Market value of warrants	$ 39,100		1700*23
Total market value	$ 1,688,100

Value assigned bonds	$ 2,391,299		2448000/1688100*1649000
Value assigned to warrants	$ 56,701		2448000/1688100*39100

ekkarill92 answered 1 year ago

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