Homework Answers
Answer:
| Fair value of bond without detachable warrant | 1000 |
| Fair value of detachable warrant without bond | 60 |
| Total fair value of bond without detachable warrant (1000*1000) | 1000000 |
| Total fair value of detachable warrants without bond (60*1000) | 60000 |
| Proportion allocated to bonds (1000000/(1000000+60000)) | 0.9434 |
| Proportion allocated to detachable warrants (60000/(1000000+60000)) | 0.0566 |
| Amount received for the combined instrument | 1025000 |
| Amount received for the combined instrument allocated to bonds | 966981.13 |
| Amount received for the combined instrument allocated to detachable warrants | 58018.87 |
Journal Entry:
| Accounts Titles & Explanation | Debit ($) | Credit ($) |
| Cash | 1025000 | |
| Bonds payable | 966981.13 | |
| Paid-in capital - stock warrants | 58018.87 | |
| (Being issue of the two securities recorded) |
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Please Help with the Part
D
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