Exercise 16-9 Account Titles and Explanation Debit Credit Account Titles and Exp

Question

Exercise 16-9

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Exercise 16-9

On May 1, 2017, Teal Company issued 1,400 $1,000 bonds at 102. Each bond was issued with one detachable stock warrant. Shortly after issuance, the bonds were selling at 97, but the fair value of the warrants cannot be determined.

(a) Prepare the entry 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

(b) Assume the same facts as part (a), except that the warrants had a fair value of $22. Prepare the entry 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. 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

Explanation / Answer

a Cash 1428000 =1400*1000*1.02 Discount on Bonds Payable 42000 =1400*1000*(1-0.97)      Bonds Payable 1400000       Paid-in Capital—Stock Warrants 70000 b Market value of bonds without warrants 1358000 =1400*1000*0.97 Market value of warrants 30800 =1400*22 Total market value 1388800 Cash 1428000 Discount on Bonds Payable 3669      Bonds Payable 1400000       Paid-in Capital—Stock Warrants 31669 =1428000/1388800*30800

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