[Anonymous]

Question taken from Becker:

“On March 1, year, 1, Even corp. issued $500,000 10% nonconvertible bonds at 103, due on February 28, year 11. Each $1000 bond was issued with 30 detachable stock warrants, each of which entitled the holder to purchase, for $50, one share of Evan’s $25 par common stock. On March 1, year 1, the market price of each warrant was $4. By what amount should the bond issue proceeds increase stockholders’ equity?

Correct answer is: $60,000

I got the answer correct using J/E, however, idk what exactly I did. What’s the correct J/E for this question?

Here’s what I’m thinking, but can’t get the amount right….

Cash 515,000

B/P 500,000

APIC-Warrants 15,000(?)

Cash 60,000

APIC-Warrants 15,000 (?)

Common Stock

APIC

Appreciate any help:!)

[latenight]

Cash 515,000 (Debit)

Discount on B/P (plug) 45,000 (Debit)

Bond Payable 500,000 (Credit)

APIC – Warrants 60,000 (Credit)

No allocation of the bond proceeds between bonds and warrants is required.

Had the question provided the market value of the bonds, you would have been required to calculate an allocation. An allocation is required when you are provided the market values of the bonds and the warrants.

AUD - 87
BEC - 76
FAR - 96
REG - 94

[latenight]

Cash 515,000 (Debit)

Discount on B/P (plug) 45,000 (Debit)

Bond Payable 500,000 (Credit)

APIC – Warrants 60,000 (Credit)

No allocation of the bond proceeds between bonds and warrants is required.

Had the question provided the market value of the bonds, you would have been required to calculate an allocation. An allocation is required when you are provided the market values of the bonds and the warrants.

AUD - 87
BEC - 76
FAR - 96
REG - 94

[Anonymous]

Great, that makes sense.

If we go further, aka when the warrants are exercised: What would be the J/Es then?

Cash (D) 60,000

APIC-Warrants(D) 60,000

Common Stock (C)

APIC (C)

Btw, I just understood the question:( It doesn't require any of these J/Es, and the question was pretty basic….duh, I feel stupid.

But I would still appreciate if someone can fill in the whole, it'd be a good practice for me.

Thanks:!)

[Anonymous]

Great, that makes sense.

If we go further, aka when the warrants are exercised: What would be the J/Es then?

Cash (D) 60,000

APIC-Warrants(D) 60,000

Common Stock (C)

APIC (C)

Btw, I just understood the question:( It doesn't require any of these J/Es, and the question was pretty basic….duh, I feel stupid.

But I would still appreciate if someone can fill in the whole, it'd be a good practice for me.

Thanks:!)

[latenight]

Nah, it's all good. Actually, you learn like I do. I like to dig into questions.

The J/E may likely be this…

500 bonds * 30 warrants per bond * $50 per share sale price = $750,000

500 bonds * 30 warrants per bond * $25 per share par value = $375,000

Cash 750,000 (Debit)

APIC – Warrants 60,000 (Debit)

Common Stock 375,000 (Credit)

APIC – Common Stock (plug) 435,000 (Credit)

AUD - 87
BEC - 76
FAR - 96
REG - 94

[latenight]

Nah, it's all good. Actually, you learn like I do. I like to dig into questions.

The J/E may likely be this…

500 bonds * 30 warrants per bond * $50 per share sale price = $750,000

500 bonds * 30 warrants per bond * $25 per share par value = $375,000

Cash 750,000 (Debit)

APIC – Warrants 60,000 (Debit)

Common Stock 375,000 (Credit)

APIC – Common Stock (plug) 435,000 (Credit)

AUD - 87
BEC - 76
FAR - 96
REG - 94

[Anonymous]

Thank you!!! I really appreciate it!!

[Anonymous]

Thank you!!! I really appreciate it!!

[Anonymous]

Thanks for all the help on the bond questions ( Previous page). I think I will reschedule my test to April. Bonds will be the death of me. Didn't think it would take this long to go over (1week). And it still isn't clear. **sigh** feeling discouraged.

[Anonymous]

Thanks for all the help on the bond questions ( Previous page). I think I will reschedule my test to April. Bonds will be the death of me. Didn't think it would take this long to go over (1week). And it still isn't clear. **sigh** feeling discouraged.

[Author]

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