Question

Exercise 16-08 On September 1, 2020, Sheridan Company sold at 104 (plus accrued interest) 3.720 of its 8%, 10 year, $1,000 face value, nonconvertible bonds with detachable stock warrants. Each bond carried two detachable warrants. Each warrant was for one share of common stock at a specified option price of $17 per share. Shortly after issuance, the warrants were quoted on the market for $3 each. No fair value can be determined for the Sheridan Company bonds. Interest is payable on December 1 and June 1. Prepare in general journal format the entry to record the issuance of the bonds. 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 o for the amounts.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT

please provide work

Answer 1

Exercise 16-08 Answer's Journal Entry Account Titles and Explanation Debiz/$) Creditló) Cash $3,943,200 Bonds payable $3,720,000 premium on Bonas $ 126,480 paid in capital-stock warents $ 22,320 Bond Interest Expense: $ 74,400 [to record the issuence of the Bonos) Explanation: using the Incremental method: Lump sum Receipt (3,720 Bond Certificatesy $1000 X 1067) $3,868,800 Less: Amount allocated to warrants $ (22,321) (ta 3,720 Certificates X warrants43 Per laxyant) :. vaine assigned to Bonds $3,8116, 480 t.tt LEGAL

- Deash=(3720 certificates &$1000 face valuexioul) +13720 textificates +1000 face value x891.433) = $3,868,800+ $1140000 $74,moo . = $905728 $3,943,200 12 2) Bona payable = 3720 Bonds & $1000 face value per Bond = $3,720,000 3) premium on Bonds=value assigned to Bonds - face value of Bonas = $3,846, 480-(3,720x$1000) = $126,480 u) paid in capital -Stock Warrants = Amount allocated to warrank - $22,320 5) Bona interest Expense Bonas Face value & Rate a time = $3,720,00048.).* W} - $74,400

Note: Interest is accrued from the last interest payment date of June 1 through the September 1 date of issuance (i.e., 3 months).

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