AccountingIn 2015, The Platinum Company issued$700,000 8% bonds with 700 nondetachablewarrants for $765,000 cash. Each warrantentitled the holder to buy 100 shares of ThePlatinum Company's $2 par common stock at$20 per share and required surrender of theattached $1,000 bond. On March 2, 2021, allThe Platinum Company bondholders exercisedtheir warrants for new shares and forfeited thebonds when shares were trading at $40 pershare. On March 2, 2021, the unamortizedpremium on the bonds was $25,000.Prepare the necessary journal entry for the bondconversion on March 2, 2021 Assume that ThePlatinum Company uses the market method torecord the stock issuances.

Bonds with detachable warrants or bonds with warrants are those in which the issuer of the bonds…

Answered: In 2015, The Platinum Company issued…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On September 1, 2020, Crane Company sold at 104 (plus accrued interest) 3,000 of its 9%, 10-year, $1,000 face value, nonconvertible bonds with detachable stock warrants. Each bond carried two detachable warrants. Each warrant was for one share of common stock at a specified option price of $16 per share. Shortly after issuance, the warrants were quoted on the market for $2 each. No fair value can be determined for the Crane Company bonds. Interest is payable on December 1 and June 1.Prepare in general journal format the entry to record the issuance of the bonds. (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.) Account Titles and Explanation Debit Credit
On July 1, 2019, Salem Corporation issued $3.3 million of 9% bonds payable in 10 years. The bonds pay interest semiannually. The bonds include detachable warrants giving the bondholder the right to purchase for $33, one share of $1 par value common stock at any time during the next 10 years. Salem sold the bonds for $3.3 million. The value of the warrants at the time of issuance was $132,000. Required: Prepare in general journal format the entry to record the issuance of the bonds.
On July 1, 2019, Salem Corporation issued $3.2 million of 10% bonds payable in 10 years. The bonds pay interest semiannually. The bonds include detachable warrants giving the bondholder the right to purchase for $32, one share of $1 par value common stock at any time during the next 10 years. Salem sold the bonds for $3.2 million. The value of the warrants at the time of issuance was $128,000. Required: Prepare in general journal format the entry to record the issuance of the bonds.
On January 1, 2022, A company issued 1,000 of its January 1, 2017, 8%, 10 year, P1,000 face value bonds with detachable stock warrants at P1,250,000. Each bonds, which pays semi-annual interest every January 1 and July 1, carried 5 detachable warrants which entitle the holder to acquire one share of ordinary shares for every warrant at a specified option price of P55 per share. Immediately after the issuance the prevailing market rate of interest is at 10% and the market value of the warrants was P30. How much is the equity component of the compound instrument? (Round off PV factor to four decimal places. Round off final answer to the nearest peso.) What is the carrying amount of the bonds as of December 31, 2022? (Round off PV factor to four decimal places. Round off final answer to the nearest peso.)
On May 1, 2014, Payne Co. issued $900,000 of 7% bonds at 102, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Payne’s common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value of Payne’s common stock was $35 per share and of the warrants was $2. On May 1, 2014, Payne should credit Paid-in Capital from Stock Warrants for $36,560. $36,720. $37,080. $65,000.
On January 1, 2017, Slug Corporation issued $6.4 million of 6%, 10-year convertible bonds at 103. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of $1 par common stock. Fuzz Company purchased 30% of the issue as an investment. On July 1, 2021, Fuzz converted all of its bonds into common stock of Slug. The market price per share for Slug was $36 at the time of the conversion. Both companies use the straight-line method for amortization. Required: 1. Prepare journal entries for the issuance of the bonds on the issuer and the investor books. 2. Prepare the journal entries for the conversion on the books of the issuer and the investor. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare journal entries for the issuance of the bonds on the issuer and the investor books. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your…
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On December 1, 2021, Bramble Corp.issued 680 of its 8%, $1,000 bonds at 104. Attached to each bond was one detachable stock warrant entitling the holder to purchase 1 share of Bramble's common stock. On December 1, 2021, the market value of the bonds, without the stock warrants, was 97, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be $700,400 O $680,000 $672,533 $665,380
On January 1, 2021, Fowl Products issued $89 million of 6%, 10-year convertible bonds at a net price of $91.5 million. Fowl recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Fowl's no par common stock. Fowl records interest by the straight-line method. On June 1, 2023, Fowl notified bondholders of its intent to call the bonds at face value plus a 1% call premium on July 1, 2023. By June 30 all bondholders had chosen to convert their bonds into shares as of the interest payment date. On June 30, Fowl paid the semiannual interest and issued the requisite number of shares for the bonds being converted. Required: 1. Prepare the journal entry for the issuance of the bonds by Fowl. 2. Prepare the journal entry for the June 30, 2021, interest payment. 3. Prepare the journal entries for the June 30, 2023, interest payment by Fowl and the conversion of the…
During 2016, Royal Corporation issued at 105, two hundred of its 8%, P 1,000 bonds in ten years. One detachable stock warrant entitling the holder to buy 20 shares of Royal’s ordinary stock was attached to each bond. Shortly after the issuance, each bond had a market value of P940, and each warrant was quoted at P60. What amount, if any, of the proceeds from the bond issuance should be recorded as part of Royal’s shareholder’s equity?
On July 1, 2022, Mocha Corporation issued P5M of its 10%, 7-year bonds with one detachable share warrant attached to each P1,000 bond. Each warrant provides for the right to purchase 20 shares of P15 par value ordinary for P20 each. The market value of the ordinary share was P 25 each at July 1, 2022. At that time, the bonds without the warrants are selling at 97. The compound financial instrument was sold at 104. What is the bonds issue price allocated to the share warrants outstanding? a.) P350,000 b.) P200,000 c.) P150,000 d.) P0

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