19 May, 13:03

# Pharoah Corporation issued 2,000 \$1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 99, and the warrants had a market price of \$48.1. Use the proportional method to record the issuance of the bonds and warrants.

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Answers (1)
1. 19 May, 15:15
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The journal entries are shown below:

Cash Dr \$2,020,000

Discount on notes payable \$73,411

To Notes payable \$2,000,000

To Paid in capital - stock warrants \$93,411

(Being the issuance of the bonds and stock warrant is recorded)

The computation is shown below:

For cash

= 2,000 * \$1,000 * 101%

= \$2,020,000

For discount on bond payable

= \$2,020,000 * 990 : (990 + 48)

= \$1.926,589

So

= \$2,000,000 - \$1,926,589

= \$73,411
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