On January 1, Costko Corporation issued $120,000 of 6%, 5-year nonconvertible bonds with nondetachable stock purchase warrants. Each $1,000 bond carried 10 warrants, each of which was for one share of Costko common stock, par value $1, at a specified option price of $40 per share. The bonds (including the warrants) sold at 102. No bond price without warrants was available. Required a. Provide the entry at the date of issuance of the bonds. b. Provide the entry at the date of issuance of the bonds assuming instead that the warrants are detachable. Immediately after the date of issuance, the detachable stock purchase warrants were selling at $5 each. Ref. a. b. Cash Account Premium on Bonds Payable Bonds Payable To record issuance of bonds with nondetachable warrants Cash Paid-in Capital-Stock Warrants Bonds Payable Premium on Bonds Payable To record issuance of bonds with detachable warrants V V V Dr. 122,400 0 0 122,400 6,000 0 0 Cr. 0✓ 2,400✔ 120,000 ✓ 0✔ 0x 120,000✔ 0x
On January 1, Costko Corporation issued $120,000 of 6%, 5-year nonconvertible bonds with nondetachable stock purchase warrants. Each $1,000 bond carried 10 warrants, each of which was for one share of Costko common stock, par value $1, at a specified option price of $40 per share. The bonds (including the warrants) sold at 102. No bond price without warrants was available. Required a. Provide the entry at the date of issuance of the bonds. b. Provide the entry at the date of issuance of the bonds assuming instead that the warrants are detachable. Immediately after the date of issuance, the detachable stock purchase warrants were selling at $5 each. Ref. a. b. Cash Account Premium on Bonds Payable Bonds Payable To record issuance of bonds with nondetachable warrants Cash Paid-in Capital-Stock Warrants Bonds Payable Premium on Bonds Payable To record issuance of bonds with detachable warrants V V V Dr. 122,400 0 0 122,400 6,000 0 0 Cr. 0✓ 2,400✔ 120,000 ✓ 0✔ 0x 120,000✔ 0x
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
1

Transcribed Image Text:On January 1, Costko Corporation issued $120,000 of 6%, 5 -year nonconvertible bonds with nondetachable stock purchase warrants. Each $1,000 bond carried 10 warrants, each of which was for one share of
Costko common stock, par value $1, at a specified option price of $40 per share. The bonds (including the warrants) sold at 102. No bond price without warrants was available.
Required
a. Provide the entry at the date of issuance of the bonds.
b. Provide the entry at the date of issuance of the bonds assuming instead that the warrants are detachable. Immediately after the date of issuance, the detachable stock purchase warrants were selling at $5
each.
Ref.
a.
b.
Cash
Account
Premium on Bonds Payable
Bonds Payable
To record issuance of bonds with nondetachable warrants
Cash
Paid-in Capital-Stock Warrants
Bonds Payable
Premium on Bonds Payable
To record issuance of bonds with detachable warrants
Dr.
122,400
0
0
122,400
6,000
0
0
Cr.
0
2,400
120,000
0
0x
120,000
0x
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