No. | Account Titles & Explanation | Debit($) | Credit($) |
1 | Cash (16500 units * $1452) | 23958000 | |
Bonds Payable (16500 units * $825) | 13612500 | ||
Common Stock (16500 units * 17 * $8) | 2244000 | ||
Paid in Capital in Excess of Par - Common Stock | 8101500 | ||
2 | Cash (16500 units * $1452) | 23958000 | |
Discount on Bonds Payable | 3460805 | ||
Bonds Payable (16500 units * $825) | 13612500 | ||
Common Stock (16500 units * 17 * $8) | 2244000 | ||
Paid in Capital in Excess of Par - Common Stock | 11562305 |
Working Note:
1) Employing the incremental method: Calculation
Particulars | Amount($) |
Lump sum (16500 units * $1452) | 23958000 |
Allocated to Bonds (16500 units * $825) | 13612500 |
Amount Allocated to Common Stock [(1452-825)*16000] | 10345500 |
Common Stock (16500 units * 17 * $8) | 2244000 |
Paid in Capital in Excess of Par - Common Stock (Amount Allocated to Common Stock - Common Stock ) ( 10345500 - 2244000) | 8101500 |
2. Employing the proportional method, assuming the recent price quote on the common stock reflects fair value.
Particulars | Amount($) |
Fair Value of Common Stock (17 × $66) | 1122 |
Fair Value of Bonds ($825× 1) | 825 |
Aggregate Fair Value | $ 1947 |
Allocated to Common Stock [ (1122/1947)*23958000] = $ 13806305.08
Allocated to Bonds [ (825/1947)*23958000] = $ 10151694.92
Discount on Bonds Payable = Bonds Payable - Allocated to Bonds = 13612500 - 10151694.92 = $ 3460805.08 , rounded $ 3460805
Paid in Excess of Par = Allocated to Common Stock - 16500 x 17 shares x $8 = 13806305.08 - 2244000 = $ 11562305.08 , rounded $ 11562305
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