Question

Tamarisk Corporation is a regional company which is an SEC registrant. The corporation's securities are thinly traded on NASDAQ. Tamarisk Corp has issued 22,500 units. Each unit consists of a $1,125 par, 12% subordinated debenture and 23 shares of $11 par common stock. The units were sold to outside investors for cash at $1,980 per unit. Prior to this sale, the 2-week ask price of common stock was $90 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value. (a) Prepare the journal entry to record Tamarisk's transaction, under the following conditions. (Round answers to 0 decimal places, e.g. $38,487. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (1) Employing the incremental method. (2) Employing the proportional method, assuming the recent price quote on the common stock reflects fair value. No. Account Titles and Explanation Debit Credit 44550000 1. Cash Bonds Payable Common Stock Paid-in Capital in Excess of Par Common Stock 2. Cash Discount on Bonds Payable Bonds Payable Common Stock Paid-in Capital in Excess of Par Common Stock

Answer 1

answe Debit Credit $ 4455000 6725auties cash (22.500 1969 Bonds payable 825312500 (2.2 Suw > 1125. Common stock $ 5692500 22500x2341 paid in capital excess of par Common Stock & 1354 boodl (6/87 [Being cash realized on issue] Cash $4455oooo Bonds discount $ 9625880 (22500x1125) -Iseel.19. Bonds payable %2532500 common stock $ 5692,50 -paid in Capital excess of par Common Stock & 23170660 20863 @u-5692500) [excess of San issued on common stock] The allocation based on the fair valve of one unit is Subordinare debentures 1125 Common Shoch (23x910) 28670 Tokal fair value 3195 To Debent uses To Common Stock 445 45 1000 x 13572-3195 215686619.7 24550000 x 2070/3195 28863380 - Thank you