Question

The stockholders’ equity section of Ivanhoe Inc. at the beginning of the current year appears below. Common stock, $10 par value, authorized 1,063,000 shares, 281,000 shares issued and outstanding $2,810,000 Paid-in capital in excess of par—common stock 645,000 Retained earnings 589,000 During the current year, the following transactions occurred. 1. The company issued to the stockholders 95,000 rights. Ten rights are needed to buy one share of stock at $32. The rights were void after 30 days. The market price of the stock at this time was $34 per share. 2. The company sold to the public a $209,000, 10% bond issue at 104. The company also issued with each $100 bond one detachable stock purchase warrant, which provided for the purchase of common stock at $30 per share. Shortly after issuance, similar bonds without warrants were selling at 96 and the warrants at $8. 3. All but 4,750 of the rights issued in (1) were exercised in 30 days. 4. At the end of the year, 80% of the warrants in (2) had been exercised, and the remaining were outstanding and in good standing. 5. During the current year, the company granted stock options for 10,300 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $10. The option price is $30. The options were to expire at year-end and were considered compensation for the current year. 6. All but 1,030 shares related to the stock-option plan were exercised by year-end. The expiration resulted because one of the executives failed to fulfill an obligation related to the employment contract.

Prepare general journal entries for the current year to record the transactions listed above. (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. Round intermediate calculations to 5 decimal places, e.g. 1.24687 and final answers to 0 decimal places, e.g. 5,125.)

Answer 1

Answers:

No	General Journal	Debit($)	Credit($)
1	No entries
2	Cash	209000
	Discount on bonds payable (209,000* 4%)	8360
	To Bonds Payable ($209,000 * 0.96)		200640
	To Paid in capital—Stock Warrants [(209,000/100) * $8]		16720
3	Cash [(95,000 - 4,750)/10 * 32]	288800
	To Common Shares [(95,000-4,750)/10*10]		90250
	To Paid in capital in excess of par		198550
4	Paid in capital-Stock Warrants ($8*(9,500*80%))	60800
	Cash ((9,500 * 80%)* 30)	228000
	To Common shares 9500 * 8)		76000
	To Paid in capital in excess of par		212800
5	Compensation Expense(10* 10,300 options)	103000
	To Paid in capital -Stock Options		103000
6	For options exercised:
	Cash (10,300*$30* 90%)	278100
	Paid in capital-Stock Options(90% * $103,000)	92700
	To Common Shares		92700
	To Paid in capital in excess of par		278100
	For options lapsed:
	Paid in capital -Stock Options(1030 * 10)	10300
	To Compensation Expense		10300