Question

Question 5 --/1 View Policies Current Attempt in Progress The stockholders' equity section of Marin Inc. at the beginning of the current year appears below. Common stock, $10 par value, authorized 928,000 shares, 292,000 shares issued and outstanding $2,920,000 Paid-in capital in excess of par-common stock 578,000 Retained earnings 582,000 During the current year, the following transactions occurred. 1. The company issued to the stockholders 95,000 rights. Ten rights are needed to buy one share of stock at $31. The rights were void after 30 days. The market price of the stock at this time was $33 per share. The company sold to the public a $191,000, 10% bond issue at 104. The company also issued with each $100 bond one detachable stock purchase warrant, which provided for the purchase of common stock at $29 per share. Shortly after issuance, similar bonds without warrants were selling at 96 and the warrants at $8. 3. All but 4,750 of the rights issued in (1) were exercised in 30 days. f the year, 80% of the warrants in (2) had been exercised, and the remaining were outstanding and in good standing. 5. During the current year, the company granted stock options for 9,100 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $10. The option price is $29. The options were to expire at year-end and were considered compensation for the current year. 6. All but 910 shares related to the stock-option plan were exercised by year-end. The expiration resulted because one of the executives failed to fulfill an obligation related to the employment contract.

Answer 1

No.	Account Titles and Explanations	Debit ($)	Credit ($)
1	Memorandum entry needs to be made to indicate the number of rights issued
2	Cash ($ 191,000 * 104/100)	198,640
	Discount on bonds payable 191,000 – {96/(8+96)*198640}	7,640
	Bonds Payable		191,000
	Paid in capital – Stock warrants 8/(8+96) *198640		15,280
	(To record the issue of bond)
3	Cash {(95,000-4,750)/10}* 31	279,775
	Common stock {(95,000-4,750)/10}*10		90,250
	Paid-in-capital in excess of par (Balancing figure)		189,525
	(To record the rights issue)
4	Paid-in-capital stock warrants (15,280 * 80%)	12,224
	Cash {(191,000/100) *80%*29}	44,312
	Common stock (191,000/100) *80%*10)		15,280
	Paid-in-capital in excess of par (balance)		41,256
	(To record the exercise of 80% of warrants)
5	Compensation expense (9100*10)	91,000
	Paid-in-capital Stock options		91,000
	(To record the compensation expense)
6.	For options exercised
	Cash (9100-910) *29	237,510
	Paid-in-capital – Stock options (91000*90%)	81,900
	Common stock		81,900
	Paid-in-capital in excess of par		237,510
	(To record the options exercised)
	For options lapsed
	Paid-in-capital – Stock options (91,000 *10%)	9,100
	Compensation expense		9,100
	(To record the options lapsed)

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