Question

Exercise 15-4

Faith Evans Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ. Faith Evans Corp. has issued 11,150 units. Each unit consists of a $558 par, 12% subordinated debenture and 11 shares of $6 par common stock. The investment banker has retained 446 units as the underwriting fee. The other 10,704 units were sold to outside investors for cash at $981 per unit. Prior to this sale, the 2-week ask price of common stock was $45 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value.

(a) Prepare the journal entry to record Evans’ transaction, under the following conditions. (Round answers to 0 decimal places, e.g. $38,487. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Journal Entry
Account Titles	Debit	Credit
Unammortised Bond	2,48,868
Cash a/c	105,00,624
To, Bond		62,21,700
To, Stock		7,35,900
To, Paid in Capital		37,91,892
Unammortised bond=	=446*558
	2,48,868
Cash=	105,00,624
	=10704*981
Bond	=11150*558
	62,21,700
Stock	=11150*11*6
	7,35,900
Note-
Best effort have been made to answer the question correctly, in case of any discrepencies kindly comment and i will try to resolve it as soon as possible.
Please provide positive feedback.