Question

Pronghorn Inc. has decided to raise additional capital by issuing $176,000 face value of bonds with...

Pronghorn Inc. has decided to raise additional capital by issuing $176,000 face value of bonds with a coupon rate of 11%. 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 $130,500, and the value of the warrants in the market is $14,500. The bonds sold in the market at issuance for $157,500.

(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 0 for the amounts. Round intermediate calculations to 5 decimal places, e.g. 1.24687 and final answers to 0 decimal places, e.g. 5,125.)

Account Titles and Explanation

Debit

Credit


(b1) Prepare the entry if the warrants were nondetachable. (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 0 for the amounts. Round intermediate calculations to 5 decimal places, e.g. 1.24687 and final answers to 0 decimal places, e.g. 5,125.)

Account Titles and Explanation

Debit

Credit

Homework Answers

Answer #1
Market value of Bonds 130500
Market value of Warrants 14500
Total Market value 145000
Value allocated to Bonds 141750 =157500*130500/145000
Value allocated to Warrants 15750 =157500*14500/145000
Account Titles and Explanation Debit Credit
Cash 157500
Discount on Bonds Payable 34250
        Bonds Payable 176000
        Paid-in Capital - Stock Warrants 15750
b1
Account Titles and Explanation Debit Credit
Cash 157500
Discount on Bonds Payable 18500
        Bonds Payable 176000
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Exercise 16-7 Shamrock Inc. has decided to raise additional capital by issuing $167,000 face value of...
Exercise 16-7 Shamrock Inc. has decided to raise additional capital by issuing $167,000 face value of bonds with a coupon rate of 10%. 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 $118,400, and the value of the warrants in the market is $29,600....
P Inc. has decided to raise additional capital by issuing $178,000 face value of bonds with...
P Inc. has decided to raise additional capital by issuing $178,000 face value of bonds with a coupon rate of 10%. 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 $120,800, and the value of the warrants in the market is $30,200. The bonds...
Nash Inc. has decided to raise additional capital by issuing $184,000 face value of bonds with...
Nash Inc. has decided to raise additional capital by issuing $184,000 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 $144,900, and the value of the warrants in the market is $16,100. The bonds...
rouper Inc. has decided to raise additional capital by issuing $168,000 face value of bonds with...
rouper 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...
Carla Corporation issued 2,200 $1,000 bonds at 103. Each bond was issued with one detachable stock...
Carla Corporation issued 2,200 $1,000 bonds at 103. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $46. Use the proportional method to record 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 0 for...
Headland Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock...
Headland Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $40. Use the proportional method to record 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 0 for...
On January 1, 2019, Metlock, Inc. issued $554,500, 14%, 10-year bonds at face value. Interest is...
On January 1, 2019, Metlock, Inc. issued $554,500, 14%, 10-year bonds at face value. Interest is payable annually on January 1. (a) Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 (b) Prepare the journal entry to record the accrual of interest on December 31, 2019. (Credit account titles are automatically indented when amount is...
On January 1, 2019, Metlock, Inc. issued $554,500, 14%, 10-year bonds at face value. Interest is...
On January 1, 2019, Metlock, Inc. issued $554,500, 14%, 10-year bonds at face value. Interest is payable annually on January 1. (a) Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 (b) Prepare the journal entry to record the accrual of interest on December 31, 2019. (Credit account titles are automatically indented when amount is...
On January 1, 2020, Sweet Company sold 11% bonds having a maturity value of $900,000 for...
On January 1, 2020, Sweet Company sold 11% bonds having a maturity value of $900,000 for $934,116, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2020, and mature January 1, 2025, with interest payable December 31 of each year. Sweet Company allocates interest and unamortized discount or premium on the effective-interest basis. Prepare the journal entry at the date of the bond issuance. (Round answer to 0 decimal places, e.g. 38,548. If no entry...
Lorance Corporation issued $808,000, 8%, 10-year bonds on January 1, 2015, for $755,444. This price resulted...
Lorance Corporation issued $808,000, 8%, 10-year bonds on January 1, 2015, for $755,444. This price resulted in an effective-interest rate of 9% on the bonds. Interest is payable semiannually on July 1 and January 1. Lorance uses the effective-interest method to amortize bond premium or discount. Prepare the journal entry to record the issuance of the bonds. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT