Question

1. Pharoah Corporation issued 1,500 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling separately at 97. The market price of the warrants without the bonds cannot be determined.

Use the incremental 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 the amounts.)

Account Titles and Explanation	Debit	Credit

2. On January 1, 2017, Kingbird Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Kingbird’s $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock is $69 per share on the date of grant. The fair value of the options at the grant date is $151,000. The period of benefit is 2 years.

Prepare Kingbird’s journal entries for January 1, 2017, and December 31, 2017 and 2018. (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.)

Date	Account Titles and Explanation	Debit	Credit

Answer 1

Answer :

1) journal entry:

Date	Account title	Debit $	Credit $
	Cash (1500 × 1000 × 101%)	1,515,000
	Discount on bonds payable	45,000
	Bonds Payable		1,500,000
	Paid in capital- stock warrants (1,50,000 × (101% - 97%))		60,000

2) journal entries

Date	Account title	Debit $	Credit $
Jan 1, 2017	no entry
Dec 31, 2017	compensation expense (1,51,000 ÷ 2)	75,500
	Paid in capital stock option		75,500
Dec 31, 2018	compensation expense (1,51,000 ÷ 2)	75,500
	Paid in capital stock option		75,500