Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 14, Problem 14.12P
a.
To determine
To prepare: The
b.
To determine
To prepare: The journal entry to record issuance of the bonds assuming warrants as detachable using proportionate method.
c.
To determine
To prepare: The journal entry to record issuance of the bonds assuming warrants as detachable using the incremental method
d.
To determine
To prepare: Journal using proportionate method for recording exercise of all warrants.
e.
To determine
To prepare: Journal using incremental method for recording exercise of all warrants.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Anteater Company issued 200 bonds, each with a face amount of $1,000,
with detachable stock warrants at 102. Each warrant entitled its holder to
acquire two shares of $100 par common stock for $125 per share. Through
discussion with investment bankers, it is determined that the bonds would
sell for 98 without the warrants. The market value of each warrant is $45.
Instructions:
A. Record the issuance of the bonds.
B. Record the entry necessary assuming half of the warrants are exercised.
C. Record the entry necessary assuming the remaining warrants after the
exercise in B. above expire before being exercised.
On December 31, 20X5. Cobb issued 2,000 of its 10%, $1,000 bonds at 99. The issuance price established a bond discount of $20,000. In connection with the sale of these bonds. Cobb paid the following expenses:
Legal and accounting fees
$45,000
Printing of the prospectus
$55,000
Underwriting fees
$85,000
In Cobb's December 31, 20X5, balance sheet, bond issue costs total
A company issued $500,000 of bonds for $498,351. Interest is paid semiannually. The bond markets and the financial press are likely to report the bond issue price as
Chapter 14 Solutions
Intermediate Accounting (2nd Edition)
Ch. 14 - What conditions or terms does a note payable...Ch. 14 - If the market rate of interest exceeds the face or...Ch. 14 - What is included in bond issue costs and how...Ch. 14 - Prob. 14.4QCh. 14 - When a bond is issued at a discount, will its...Ch. 14 - Prob. 14.6QCh. 14 - Prob. 14.7QCh. 14 - Under IFRS, how do firms account for convertible...Ch. 14 - Prob. 14.9QCh. 14 - Can companies reclassify short-term debt expected...
Ch. 14 - Under IFRS, can companies reclassify short-term...Ch. 14 - Do companies always reclassify long-term debt that...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Prob. 14.15QCh. 14 - Prob. 14.16QCh. 14 - Prob. 14.1MCCh. 14 - Prob. 14.2MCCh. 14 - Prob. 14.3MCCh. 14 - Prob. 14.4MCCh. 14 - Prob. 14.5MCCh. 14 - Clothes Horse Corp. (CHC) Issued 500,000 bonds due...Ch. 14 - Prob. 14.7MCCh. 14 - Prob. 14.8MCCh. 14 - Prob. 14.9MCCh. 14 - Prob. 14.10MCCh. 14 - Prob. 14.11MCCh. 14 - Prob. 14.1BECh. 14 - Notes Payable. Using the information provided in...Ch. 14 - Prob. 14.3BECh. 14 - Prob. 14.4BECh. 14 - Prob. 14.5BECh. 14 - Prob. 14.6BECh. 14 - Bond Terminology. Match each term with its...Ch. 14 - Bond Pricing. Fill in the missing items for each...Ch. 14 - Prob. 14.9BECh. 14 - Bond Issue Price. Using the information from...Ch. 14 - Prob. 14.11BECh. 14 - Prob. 14.12BECh. 14 - Prob. 14.13BECh. 14 - Prob. 14.14BECh. 14 - Prob. 14.15BECh. 14 - Prob. 14.16BECh. 14 - Prob. 14.17BECh. 14 - Prob. 14.18BECh. 14 - Bonds Issued between Interest Payment Dates. For...Ch. 14 - Prob. 14.20BECh. 14 - Prob. 14.21BECh. 14 - Prob. 14.22BECh. 14 - Prob. 14.23BECh. 14 - Prob. 14.24BECh. 14 - Prob. 14.25BECh. 14 - Prob. 14.26BECh. 14 - Prob. 14.27BECh. 14 - Prob. 14.28BECh. 14 - Prob. 14.29BECh. 14 - Prob. 14.30BECh. 14 - Short-Term Debt Expected to Be Refinanced, IFRS....Ch. 14 - Prob. 14.32BECh. 14 - Prob. 14.33BECh. 14 - Prob. 14.34BECh. 14 - Prob. 14.35BECh. 14 - Fair Value Option. Saratoga Company issued bonds...Ch. 14 - Prob. 14.37BECh. 14 - Financial Statement Disclosure. Use the following...Ch. 14 - Prob. 14.1ECh. 14 - Prob. 14.2ECh. 14 - Prob. 14.3ECh. 14 - Prob. 14.4ECh. 14 - Prob. 14.5ECh. 14 - Bond Issue, Interest Payments, Effective Interest...Ch. 14 - Prob. 14.7ECh. 14 - Prob. 14.8ECh. 14 - Prob. 14.9ECh. 14 - Prob. 14.10ECh. 14 - Prob. 14.11ECh. 14 - Prob. 14.12ECh. 14 - Convertible Bonds, Conversion. On January 1, 2018,...Ch. 14 - Convertible Bonds, Conversion. Using the...Ch. 14 - Prob. 14.15ECh. 14 - Prob. 14.16ECh. 14 - Prob. 14.17ECh. 14 - Prob. 14.18ECh. 14 - Warrants. DHC Associates issued 2,100 of its...Ch. 14 - Prob. 14.20ECh. 14 - Prob. 14.21ECh. 14 - Prob. 14.1PCh. 14 - Long-Term Notes Payable, Semiannual Interest,...Ch. 14 - Note Payable Issued at a Discount with...Ch. 14 - Prob. 14.4PCh. 14 - Prob. 14.5PCh. 14 - Bond Issue, Interest Payments, Effective Interest...Ch. 14 - Prob. 14.7PCh. 14 - Bonds Sold between Interest Dates at a Discount,...Ch. 14 - Prob. 14.9PCh. 14 - Prob. 14.10PCh. 14 - Convertible Bonds, Bond Issue Costs, Conversion....Ch. 14 - Prob. 14.12PCh. 14 - Prob. 14.13PCh. 14 - Prob. 1JCCh. 14 - Prob. 2JCCh. 14 - Prob. 3JCCh. 14 - Prob. 1FSCCh. 14 - Prob. 1SSCCh. 14 - Surfing the Standards Case 2: Bonds with...Ch. 14 - Prob. 1BCC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- on january 1, 2005, the knowshon moreno company issued 200,000 bonds, each bond with a face value of $ 1,000. these moreno bonds sold for $187,000. each $ 1,000 bond comes with one detachable warrant to purchase one share of moreno common stock (par value) for $10. at the time the bonds and warrants were issued, each share of moreno's common stock was selling for $18. investment bankers estimate the value of each warrant to be $23. it is determined that the bonds, if sold without the warrants, would sell for $ 185,000arrow_forwardMae Jong Corp. issues $1,000,000 of 10% bonds payable which may be converted into 10,000 shares of $2 par value ordinary shares. The market rate of interest on similar bonds is 12%. Interest is payable annually on December 31, and the bonds were issued for total proceeds of $1,000,000. In accounting for these bonds, Mae Jong Corp. will: a. first assign a value to the equity component, then determine the liability component. b. assign no value to the equity component since the conversion privilege is not separable from the bond. c. first assign a value to the liability component based on the face amount of the bond. d. use the “with-and-without” method to value the compound instrument.arrow_forwardHoffman Corporation issued $80 million of 7%, 10-year bonds at 104. Each of the 80,000 bonds was issued with 11 detachable stock warrants, each of which entitled the bondholder to purchase, for $22, one share of $1 par common stock. At the time of sale, the market value of the common stock was $27 per share and the market value of each warrant was $5. Prepare the journal entry to record the issuance of the bonds. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Event General Journal Debit Credit 1 Cash 83.2 Discount on bonds payable 40.8 X Bonds payable 80.0 O Equity-stock warrants 44.0 X Next > ( Prev 6 of 7arrow_forward
- On January 1, Year 1, Gibson Corporation purchased bonds issued by Williamson Company. These bonds were classified as held-to-maturity securities. The face value of these bonds is $100,000, pay 8% interest and were purchased to yield 6%. The bonds mature in 10 years and pay interest on an annual basis. If Gibson Corporation paid $114,720 for these bonds, how much interest revenue should it report on the bonds at December 31, Year 1? Assume that Gibson used the effective interest method. Group of answer choices $6000 $6883 $9178 $8000arrow_forwardEisler Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $40. Use the proportional method to record the issuance of the bonds and warrants.arrow_forwardOn the first day of its fiscal year, Ebert Company issued $50,000,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 9%, resulting in Ebert Company receiving cash of $43,495,895. The company uses the interest method.a. Journalize the entries to record the following:1. Sale of the bonds.2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar.3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar.b. Compute the amount of the bond interest expense for the first year.c. Explain why the company was able to issue the bonds for only $43,495,895 rather than for the face amount of $50,000,000.arrow_forward
- A company issued 9.2%, 10-year bonds with a par value of $100,000. Interest is paid semiannually. The market interest rate on the issue date was 10%, and the issuer received $95,016 cash for the bonds. On the first semiannual interest date, what amount of cash should be paid to the holders of these bonds for interest?arrow_forwardHoosier Company issued $20,000,000 par value 10% bonds at 98. One detachable stock purchase warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $4 Present the entries required to record the transactionarrow_forwardAdonis Corporation issued 10-year, 7% bonds with a par value of $160,000. Interest is paid semiannually. The market rate on the issue date was 6%. Adonis received $171,906 in cash proceeds. Which of the following statements is true? a) Adonis must pay $160,000 at maturity and no interest payments.b) Adonis must pay $160,000 at maturity plus 20 interest payments of $4,800 each.c) Adonis must pay $160,000 at maturity plus 20 interest payments of $5,600 each.d) Adonis must pay $171,906 at maturity plus 20 interest payments of $5,600 each.e) Adonis must pay $171,906 at maturity and no interest payments.arrow_forward
- Medhurst Corporation issued $91,900 in bonds for $89,000. The bonds had a stated rate of 6% and pay interest quarterly. What is the journal entry to record the sale of the bonds? If an amount box does not require an entry, leave it blank. fill in the blank 2 fill in the blank 3 fill in the blank 5 fill in the blank 6 fill in the blank 8 fill in the blank 9arrow_forwardLangdon & Co. issues bonds with a face value of $50,000 for $51,000. Each $1,000 bond carries 10 warrants, and each warrant allows the holder to acquire one share of $1 par common stock for $40 per share. Immediately after the issuance, the bonds are quoted at 99 ex rights and the warrants are quoted at $5 each. Calculate the value to be assigned to the bonds and to the warrants. Round your answers to two decimal places.arrow_forwardAdonis Corporation issued 10-year, 9% bonds with a par value of $260,000. Interest is paid semiannually. The market rate on the issue date was 8%. Adonis received $277,671 in cash proceeds. Which of the following statements is true? a) Adonis must pay $260,000 at maturity plus 20 interest payments of $11,700 each.b) Adonis must pay $260,000 at maturity plus 20 interest payments of $10,400 each.c) Adonis must pay $260,000 at maturity and no interest payments.d) Adonis must pay $277,671 at maturity plus 20 interest payments of $11,700 each.e) Adonis must pay $277,671 at maturity and no interest payments.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education