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Chapter 16-Solutions for Selective Long Problems

# Chapter 16-Solutions for Selective Long Problems - PROBLEM...

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PROBLEM 16-1 (a) 1. Memorandum entry made to indicate the number of rights issued. 2. Cash . ........................................................................................ 200,000 Discount on Bonds Payable*. ................................................. 15,385 Bonds Payable. .............................................................. 200,000 Paid-in Capital—Stock Warrants**. .......................... 15,385 * *Allocated to Bonds : \$96 X \$200,000 = \$184,615; \$96 + \$8 Discount = \$200,000 – \$184,615 = \$15,385 **Allocated to Warrants : \$8 X \$200,000 = \$15,385 \$96 + \$8 3. Cash*. ....................................................................................... 288,000 Common Stock (9,000 X \$10). ...................................... 90,000 Paid-in Capital in Excess of Par. ................................. 198,000 *[(100,000 – 10,000) rights exercised] ÷ *[ (10 rights/share) X \$32 = \$288,000 4. Paid-in Capital—Stock Warrants. ........................................ 12,308 (15,385 X 80%) Cash*. ....................................................................................... 48,000 Common Stock (1,600 X \$10). ...................................... 16,000 Paid-in Capital in Excess of Par. ................................. 44,308 *.80 X \$200,000/\$100 per bond = 1,600 * warrants exercised; 1,600 X \$30 = \$48,000

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PROBLEM 16-1 (Continued) 5. Compensation Expense*. ........................................................ 50,000 Paid-in Capital—Stock Options. ................................. 50,000 *\$10 X 5,000 options = \$50,000 6. For options exercised : Cash (4,000 X \$30). ................................................................. 120,000 Paid-in Capital—Stock Options. ........................................... 40,000 (80% X \$50,000) Common Stock (4,000 X \$10). ...................................... 40,000 Paid-in Capital in Excess of Par. ................................. 120,000 For options lapsed : Paid-in Capital—Stock Options. ........................................... 10,000 Compensation Expense*. .............................................. 10,000 *(Note: This entry indicates that a credit to Compensation Expense occurs when the employee fails to fulfill an obligation, such as remaining in the employment of the company. Conversely, if a stock option expires because the stock price is lower than the exercise price, then a credit to Paid-in Capital—Expired Stock Options occurs.) (b) Stockholders’ Equity: Paid-in Capital: Common Stock, \$10 par value, authorized 1,000,000 shares, 314,600 shares issued and outstanding \$3,146,000 Paid-in Capital in Excess of Par* 962,308 Paid-in Capital—Stock Warrants* 3,077 \$4,111,385 Retained Earnings 750,000 Total Stockholders’ Equity \$4,861,385 *These two accounts often are combined into one category called Additional Paid-in Capital, for financial reporting purposes.
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Chapter 16-Solutions for Selective Long Problems - PROBLEM...

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