Recording Entries for Bonds with Warrants On July 1, 2020, Salem Corporation issued $2,600,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually. 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. The value of the stock purchase rights at the time of issuance was $130,000. The bonds would sell without warrants at $2,522,000. Required a. Record the entry for issuance of bonds using the proportional method. b. Record the entry for issuance of bonds assuming instead that the warrants are not detachable. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round your answers to the nearest whole dollar.
Recording Entries for Bonds with Warrants On July 1, 2020, Salem Corporation issued $2,600,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually. 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. The value of the stock purchase rights at the time of issuance was $130,000. The bonds would sell without warrants at $2,522,000. Required a. Record the entry for issuance of bonds using the proportional method. b. Record the entry for issuance of bonds assuming instead that the warrants are not detachable. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round your answers to the nearest whole dollar.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Recording Entries for Bonds with Warrants
On July 1, 2020, Salem Corporation issued $2,600,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually. 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. The value of the stock purchase rights at the time of issuance was $130,000. The bonds would sell without warrants at $2,522,000.
Required
a. Record the entry for issuance of bonds using the proportional method.
b. Record the entry for issuance of bonds assuming instead that the warrants are not detachable.
- Note: List multiple debits or credits (when applicable) in alphabetical order.
- Note: Round your answers to the nearest whole dollar.
Transcribed Image Text:Date
Account Name
Dr.
Cr.
a. July 1, 2020
b. July 1, 2020
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