1 answer

Exercise 16-07 Coronado Inc. has decided to raise additional capital by issuing $178,000 face value of...

Question:

Exercise 16-07 Coronado Inc. has decided to raise additional capital by issuing $178,000 face value of bonds with a coupon ra

Exercise 16-07 Coronado 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 $142,200, and the value of the warrants in the market is $15.800. The bonds sold in the market at issuance for $154,500. (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 for the amounts. Round Intermediate calculations tos decimal places .g. 1.24687 and final answers to decimal places... 5.125.) Account Titles and Explanation H Debit Credit (1) Prepare the entry if the warrants were nondetachable. (Crédit 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 for the amounts. Round intermediate calculations to 5 decimal places. e.o. 1.24687 and final answers to o decimal places, e.g. 5,125.) Account Titles and Explanation Debit Credit Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS LINK TO VIDEO LINK TO TEXT Question Attempts: 0 of 2 used SUBMIT ANSWER

Answers

Answer

Value assigned to bonds

$ 139,050 154500/(142200+15800)*142200
Value assigned to warrants $   15,450 154500/(142200+15800)*15800
a)
Account Title Debit Credit
Cash $ 154,500
Discount on Bonds Payable $   38,950 178000-139050
        Bonds Payable $178,000
        Paid-in Capital - Stock Warrants $ 15,450
b1)
Account Title Debit Credit

Cash

$ 154,500
Discount on Bonds payable $   23,500 178000-154500
        Bonds payable $178,000
.

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