On May 1, 2010, Payne Co. issued $300,000 of 7% bonds at 103, which are due on A

Question

On May 1, 2010, Payne Co. issued $300,000 of 7% bonds at 103, which are due on April 30, 2020. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Payne’s common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2010, the fair value of Payne’s common stock was $35 per share and of the warrants was $2. On May 1, 2010, Payne should credit Paid-in Capital from Stock Warrants for

a. $11,520.
b. $12,000.
c. $12,360.
d. $21,000.

Explanation / Answer

No of Bonds = $300,000/$1000 = 300 No of warrats = No of Bonds *20 = 300*20 = 6000 SO Total price of warrants = 6000*$2 = $12,000 So Ans is b. $12,000

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