Question

Exercise 15-04 Your answer is partially correct. Try again. Stellar Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ. Stellar Corp. has issued 16,500 units. Each unit consists of a $825 par, 12% subordinated debenture and 17 shares of $8 par common stock. The units were sold to outside investors for cash at $1,452 per unit. Prior to this sale, the 2-week ask price of common stock was $66 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 Stellar’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 1. enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount 2. enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount SHOW LIST OF ACCOUNTS LINK TO TEXT Question Attempts: 1 of 3 used SAVE FOR LATER SUBMIT ANSWER

Answer 1

- Gredet solution 1 Employing the Incremental Method. INO Account titles and Explanation / Debit Cash 23958000 Bonds payable Common Stock (16500x8x17] paid in capital in excess of par- Common stock [ To record common stock and - Bonds payable ] - 13612500 2244000 8101500 - Lump Sum Receppt [ 16500 x 1452] Allocated to Bonde ( 825 x 16500] Amount Allocated to common stock = 23958000 = 13612500 = 10345500 23958000 3321386 13612500 2244000 Cash Discount on Bonds payable Bonds payable Common Stock [16500 X 8X17] paid in capital in excess of par - Common Stock [ To record common stock and Bonds payable 11472886

1105 fair value of common stock [ 17x65] fair value Bonds [825x I] 1. Aggregate Fair value 825 A . 1930 Allocated to common stock f1105/1930] * 23958000] = 13916886 Allocated to Bonds CC 825/1930) X 23458000] = 1024014 Discount on Bonds payable = 13612500 – 10241114 = 3371386 paid an excess of paq = 13716886 - [16500 x 1a x8] = 11472886