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A221 week 6

A221 week 6 - E 16-1 1 9,900,000 100,000 Unamortized Bond...

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E 16-1 1. Cash (\$10,000,000 X .99) ................................ 9,900,000 Discount on Bonds Payable .......................... 100,000 Bonds Payable ......................................... 10,000,000 Unamortized Bond Issue Costs ..................... 70,000 Cash .......................................................... 70,000 2. Cash ................................................................. 9,800,000 Discount on Bonds Payable .......................... 600,000 Bonds Payable ......................................... 10,000,000 Paid-in Capital—Stock Warrants ............ 400,000 Value of bonds plus warrants (\$10,000,000 X .98) \$9,800,000 Value of warrants (100,000 X \$4) 400,000 Value of bonds \$9,400,000 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] EXERCISE 16-2 (15–20 minutes) (a) Interest Payable (\$150,000 X 2/6) .................. 50,000 Interest Expense (\$150,000 X 4/6) + \$2,032 .... 102,032 Discount on Bonds Payable ................... 2,032

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Cash (\$3,000,000 X 10% ÷ 2) ................... 150,000 Calculations: Par value \$3,000,000 Issuance price 2,940,000 Total discount \$ 60,000
E 16-2 Months remaining 118 Discount per month (\$60,000 ÷ 118) \$508 Discount amortized (4 X \$508) \$2,032 (b) Bonds Payable ...................................................... 1,000,000 Discount on Bonds Payable .......................... 18,305 Common Stock (30,000 X \$20) ....................... 600,000 Paid-in Capital in Excess of Par .................... 381,695* *(\$1,000,000 – \$18,305) – \$600,000 Calculations: Discount related to 1/3 of the bonds (\$60,000 X 1/3) \$20,000 Less: Discount amortized [(\$60,000 ÷ 118) X 10 X 1/3] 1,695 Unamortized bond discount \$18,305 P16-7 (a)

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A221 week 6 - E 16-1 1 9,900,000 100,000 Unamortized Bond...

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