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On July 1 of Year 1, Salem Corporation authorized $2,000,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually each June 30 and December 31. Each $1,000 bond includes a detachable stock purchase warrant. Each warrant gives the bondholder the right to purchase, for $30, one share of $1 par value common stock at any time during the next 10 years. The bonds were sold at 101 on July 1 of Year 1. The value of the stock. purchase warrants at the time of issuance was $100,000. The bonds would sell without warrants at $ $1,940,000. a. Record the entry for issuance of bonds on July 1 of Year 1 using the proportional method. •Note: Carry all decimals in calculations; round the final answer to the nearest dollar. This means that your allocation ratio should not be rounded--use no less than four decimal places such as 0.8102. Date July 1 Cash Bonds Payable Date July 1 Account Name To record bond issuance. Cash Account Name V Bonds Payable Premium on Bonds Payable To record bond issuance. V V V V Debit 2020000 b. Record the entry for issuance of bonds on July 1 of Year 1 assuming instead that the warrants are not detachable. V 0 0 0 Debit 2020000 Credit 0 0 0 0 2000000 Credit 0 0 2000000 20000

On July 1 of Year 1, Salem Corporation authorized $2,000,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually each June 30 and December 31. Each $1,000 bond includes a detachable stock purchase warrant. Each warrant gives the bondholder the right to purchase, for $30, one share of $1 par value common stock at any time during the next 10 years. The bonds were sold at 101 on July 1 of Year 1. The value of the stock. purchase warrants at the time of issuance was $100,000. The bonds would sell without warrants at $ $1,940,000. a. Record the entry for issuance of bonds on July 1 of Year 1 using the proportional method. •Note: Carry all decimals in calculations; round the final answer to the nearest dollar. This means that your allocation ratio should not be rounded--use no less than four decimal places such as 0.8102. Date July 1 Cash Bonds Payable Date July 1 Account Name To record bond issuance. Cash Account Name V Bonds Payable Premium on Bonds Payable To record bond issuance. V V V V Debit 2020000 b. Record the entry for issuance of bonds on July 1 of Year 1 assuming instead that the warrants are not detachable. V 0 0 0 Debit 2020000 Credit 0 0 0 0 2000000 Credit 0 0 2000000 20000

FINANCIAL ACCOUNTING
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 July 1 of Year 1, Salem Corporation authorized $2,000,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually each June 30 and December 31. Each $1,000 bond includes a detachable stock purchase warrant. Each warrant gives the bondholder the right to purchase, for $30, one share of $1 par value common stock at any time during the next 10 years. The bonds were sold at 101 on July 1 of Year 1. The value of the stock purchase warrants at the time of issuance was $100,000. The bonds would sell without warrants at $ $1,940,000. a. Record the entry for issuance of bonds on July 1 of Year 1 using the proportional method. •Note: Carry all decimals in calculations; round the final answer to the nearest dollar. This means that your allocation ratio should not be rounded--use no less than four decimal places such as 0.8102. Date July 1 Cash Date July 1 Bonds Payable Account Name To record bond issuance. Cash Account Name Debit 2020000 Bonds Payable Premium on Bonds Payable To record bond issuance. 0 0 0 b. Record the entry for issuance of bonds on July 1 of Year 1 assuming instead that the warrants are not detachable. Debit 2020000 Credit 0 0 0 0 2000000 Credit 0 0 2000000 20000
Transcribed Image Text:On July 1 of Year 1, Salem Corporation authorized $2,000,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually each June 30 and December 31. Each $1,000 bond includes a detachable stock purchase warrant. Each warrant gives the bondholder the right to purchase, for $30, one share of $1 par value common stock at any time during the next 10 years. The bonds were sold at 101 on July 1 of Year 1. The value of the stock purchase warrants at the time of issuance was $100,000. The bonds would sell without warrants at $ $1,940,000. a. Record the entry for issuance of bonds on July 1 of Year 1 using the proportional method. •Note: Carry all decimals in calculations; round the final answer to the nearest dollar. This means that your allocation ratio should not be rounded--use no less than four decimal places such as 0.8102. Date July 1 Cash Date July 1 Bonds Payable Account Name To record bond issuance. Cash Account Name Debit 2020000 Bonds Payable Premium on Bonds Payable To record bond issuance. 0 0 0 b. Record the entry for issuance of bonds on July 1 of Year 1 assuming instead that the warrants are not detachable. Debit 2020000 Credit 0 0 0 0 2000000 Credit 0 0 2000000 20000
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