Illustration 16-3 Expanded

Illustration 16-3 Expanded - APIC- warrants 24,876 APIC...

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Illustration 16-3 (expanded) Stock Warrants issued with Debt Securities Assume 1,000 bonds with warrants attached were sold at par ($1,000). Each warrant allows the holder to buy one share of $10 par value common stock at a price of $15. The warrants are detachable. Proportional Method Allocate the $1,000,000 as shown on the original Illustration 16-3. Journal entry to record the issue of the bonds: Cash 1,000,000 Discount 24,876 Bonds Payable 1,000,000 APIC – warrants 24,876 Now assume all the warrants are exercised. Cash 15,000 APIC – warrants 24,876 Common Stock 10,000 APIC- Common 29,876 Instead, assume that the warrants expire and are not exercised
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Unformatted text preview: APIC- warrants 24,876 APIC expired warrants 24,876 Incremental Method (used when one of the securities, either the bonds or the warrants, does not have a FMV) Allocate the $1,000,000 as shown on the original Illustration 16-3. Journal entry to record the issue of the bonds: Cash 1,000,000 Discount 30,000 Bonds Payable 1,000,000 APIC warrants 30,000 Now assume all the warrants are exercised. Cash 15,000 APIC warrants 30,000 Common Stock 10,000 APIC- Common 35,000 Instead, assume that the warrants expire and are not exercised APIC- warrants 30,000 APIC expired warrants 30,000...
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This note was uploaded on 03/16/2010 for the course BUSACC 1205 taught by Professor Boyas during the Spring '10 term at Pittsburgh.

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Illustration 16-3 Expanded - APIC- warrants 24,876 APIC...

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