Question

Nash Inc. has decided to raise additional capital by Issuing $168.000 face value of bonds with a coupon rate of 9%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $154,800, and the value of the warrants in the market is $17.200. The bonds sold in the market at issuance for $154,000 (a) What entry should be made at the time of the issuance of the bonds and warrants? 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 for the amounts. Round intermediate calculations to 5 decimal places, eg 1.24687 and final answers to decimal places, s. 5.125.) Account Titles and Explanation Debit Credit

Answer 1

Credit (a) Account Titles and Explanation Cash Discount on Bonds Payable (14,000 + 15,400) Bonds Payable Paid-in Capital - Stock Warrants (To record issue of bonds and warrants) Debit 1,54,000 29,400 1,68,000 15,400 Market value of Bonds Market value of Warrants Total market value Value assigned to Bonds (154,000/172,000 X 154,800) Value assigned to Warrants (154,000/172,000 X 17,200) 1,54,800 17,200 1,72,000 1,38,600 15,400 Credit (61) Account Titles and Explanation Cash Discount on Bonds Payable Bonds Payable |(To record issue of bonds without warrants) Debit 1,54,000 14,000 1,68,000