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OverLord2011 [107]
3 years ago
8

Blue Inc. has decided to raise additional capital by issuing $185,000 face value of bonds with a coupon rate of 10%. In discussi

ons with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $126,400, and the value of the warrants in the market is $31,600. The bonds sold in the market at issuance for $150,000.
a. What entry should be made at the time of the issuance of the bonds and warrants?
b. Prepare the entry if the warrants were nondetachable.
Business
1 answer:
Olin [163]3 years ago
8 0

Answer:

a)

Cash debit : $150000

Debit discount on BP : $65000

Credit BP : $185000

Credit Paid-in Capital- Stock Warrants : $30000

b)

Cash debit : $150000

Debit discount on BP : $35000

Credit BP : $185000

Explanation:

Given that:

Issuance price = $150000, value of bonds without warrants = $126400, value of warrants = $31600,

Face value = $185000

a)

value assigned to bonds= [value of bonds without warrants/(value of bonds without warrants + value of warrants)] * issue price = [126400/(126400 + 31600)] * 1500000 = 126400 / 158000 * 150000 = $120000

value assigned to warrants = [value of warrants/(value of bonds without warrants+value of warrants)] * issue price = 31600 / (126400 + 31600) * 150000 = 31600 / 158000 * 150000 = $30000

Cash debit = Issuance price = $150000

Debit discount on BP = Face value - value assigned to bonds = $185000 - $120000 = $65000

Credit BP = face value = $185000

Credit Paid-in Capital- Stock Warrants = value assigned to warrants = $30000

b)

Cash debit = Issuance price = $150000

Debit discount on BP = Face value - issuance price = $185000 - $150000 = $35000

Credit BP = face value = $185000

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Answer:

The correct answer is $36,000.

Explanation:

According to the scenario, the given data are as follows:

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So, Sales cost = 6,000 × $10 = $60,000

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3 years ago
Reducing (and sometimes eliminating) the size of engineering staffs has become a recent trend among airlines since they are no l
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True

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Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities was $34,0
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Answer:

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3 years ago
Problems and Applications
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Answer and Explanation:

The calculations are shown below:

1) 4 is choosen because the marginal utility should be less than the marginial cost and if he choose beyong this point, the cost of the drink is more than the willingness to pay

2) The consumer surplus is  

= (5 - 1.5) + (4 - 1.5) + (3 - 1.5) + (2 - 1.5)

= 8

3) Total surplus decreases to

= Consumer surplus - external cost

= 8 - 4

= 4

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= (5 - 1.5) + (4 - 1.5) + (3 - 1.5)

= 7.5

5) Increases

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12) would

13) increases

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