Chapter 16

# Chapter 16 - SOLUTIONS TO EXERCISES EXERCISE 16-1 1...

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SOLUTIONS TO EXERCISES EXERCISE 16-1 1. Cash (\$20,000,000 X .99). ............................... 19,800,000 Discount on Bonds Payable. ......................... 200,000 Bonds Payable. ........................................ 20,000,000 Unamortized Bond Issue Costs . ................... 70,000 Cash. ......................................................... 70,000 2. Cash. ................................................................ 19,600,000 Discount on Bonds Payable. ......................... 1,200,000 Bonds Payable. ........................................ 20,000,000 Paid-in Capital—Stock Warrants. ........... 800,000 Value of bonds plus warrants (\$20,000,000 X .98) \$19,600,000 Value of warrants (200,000 X \$4) 800,000 Value of bonds \$18,800,000 3. Debt Conversion Expense. ............................ 75,000 Bonds Payable. ............................................... 10,000,000 Discount on Bonds Payable. .................. 55,000 Common Stock . ....................................... 1,000,000 Paid-in Capital in Excess of Par. ............ 8,945,000* Cash. ......................................................... 75,000 *[(\$10,000,000 – \$55,000) – \$1,000,000]

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EXERCISE 16-9 (a) Cash (\$2,000,000 X 1.02). .......................... 2,040,000 Discount on Bonds Payable. .................... 40,000 [(1 – .98) X \$2,000,000] Bonds Payable. ..................................... 2,000,000 Paid-in Capital—Stock Warrants. ........ 80,000* *\$2,040,000 – (\$2,000,000 X .98) (b) Market value of bonds without warrants \$1,960,000 (\$2,000,000 X .98) Market value of warrants (2,000 X \$30) 60,000 Total market value \$2,020,000 \$1,960,000 \$2,020,000 X \$2,040,000 = \$1,979,406 Value assigned to bonds \$60,000 \$2,020,000 X \$2,040,000 = \$ 60,594 Value assigned to warrants \$2,040,000 Total Cash . ........................................................................ 2,040,000 Discount on Bonds Payable . ................................. 20,594 Bonds Payable. ................................................... 2,000,000 Paid-in Capital—Stock Warrants. ...................... 60,594
1/1/08 No entry 12/31/08 Compensation Expense . ................................... 175,000 Paid-in Capital—Stock Options . ............ 175,000 (\$350,000 X 1/2) (To recognize compensation expense for 2008) 4/1/09 Paid-in Capital—Stock Options . ....................... 17,500 Compensation Expense . ........................ 17,500 (\$175,000 X 2,000/20,000) (To record termination of stock options held by resigned employees) 12/31/09 Compensation Expense . ................................... 157,500 Paid-in Capital—Stock Options . ............ 157,500 (\$350,000 X 1 / 2 X 18 / 20 ) (To recognize compensation expense for 2009) 3/31/10 Cash (12,000 X \$25). ........................................... 300,000 Paid-in Capital—Stock Options . ....................... 210,000 (\$350,000 X 12,000/20,000) Common Stock. ....................................... 120,000 Paid-in Capital in Excess of Par . ........... 390,000

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Chapter 16 - SOLUTIONS TO EXERCISES EXERCISE 16-1 1...

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