On May 1, 2021, Marly Co. issued $2,500,000 of 7% bonds at 103, which are due on April 30, 2031. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Marly'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, 2021, the fair value of Marly's common stock was $35 per share and of the warrants was $2. On May 1, 2021, Marly should record the bonds with a a. discount of $28,000. b. discount of $100,000. c. premium of $75,000. d. discount of $25,000.
On May 1, 2021, Marly Co. issued $2,500,000 of 7% bonds at 103, which are due on April 30, 2031. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Marly'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, 2021, the fair value of Marly's common stock was $35 per share and of the warrants was $2. On May 1, 2021, Marly should record the bonds with a a. discount of $28,000. b. discount of $100,000. c. premium of $75,000. d. discount of $25,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On May 1, 2021, Marly Co. issued $2,500,000 of 7% bonds at 103, which are due on April 30, 2031. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Marly'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, 2021, the fair value of Marly's common stock was $35 per share and of the warrants was $2.
On May 1, 2021, Marly should record the bonds with a
a. discount of $28,000.
b. discount of $100,000.
c. premium of $75,000.
d. discount of $25,000.
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