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Chapter 16: 8Q (page 874)

On July 1, 2017, Roberts Corporation issued \(3,000,000 of 9% bonds payable in 20 years. The bonds include detachable warrants giving the bondholder the right to purchase for \)30 one share of \(1 par value common stock at any time during the next 10 years. The bonds were sold for \)3,000,000. The value of the warrants at the time of issuance was $100,000. Prepare the journal entry to record this transaction.

Short Answer

Expert verified

Cash account and discount on bonds payable will be debited with $3,000,000 and $100,000 respectively. Bonds payable and Paid-In capital- Stock warrants account will be credited with $3,000,000 and $100,000 respectively.

Step by step solution

01

The details provided in the question are as follows

We have

Bond Payable $3,000,000

Stock Warrants $100,000

02

Representing given data in journals for of accounting

Date

Particulars

Debit

Credit

Cash

3,000,000

Discount on Bonds Payable

100,000

Bonds Payable

3,000,000

Paid-in Capital鈥擲tock Warrants

100,000

Being sale of bond is recorded

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Most popular questions from this chapter

(Issuance, Exercise, and Termination of Stock Options) On January 1, 2018, Titania Inc. granted stock options to officers and key employees for the purchase of 20,000 shares of the company鈥檚 \(10 par common stock at \)25 per share. The options were exercisable within a 5-year period beginning January 1, 2020, by grantees still in the employ of the company, and expiring December 31, 2024. The service period for this award is 2 years. Assume that the fair value option-pricing model determines total compensation expense to be \(350,000.On April 1, 2019, 2,000 options were terminated when the employees resigned from the company. The market price of the common stock was \)35 per share on this date.On March 31, 2020, 12,000 options were exercised when the market price of the common stock was $40 per share.

Instructions

Prepare journal entries to record issuance of the stock options, termination of the stock options, exercise of the stock options, and charges to compensation expense, for the years ended December 31, 2018, 2019, and 2020.

What are the computational guidelines for determining whether a convertible security is to be reported as part of diluted earnings per share?

What date or event does the profession believe should be used in determining the value of a stock option? What arguments support this position?

IFRS16-12 Assume the same information in IFRS16-11, except that Angela Corporation converts its convertible bonds on January 1, 2017.

Instructions

(a) Compute the carrying value of the bond payable on January 1, 2017.

(b) Prepare the journal entry to record the conversion on January 1, 2017.

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What are the advantages of using restricted stock to compensate employees?
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