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Buffalo Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 99, and the warrants had a market price of $38. Use the proportional method to record the issuance of the bonds and warrants.

Respuesta :

sahir9397

Answer:

Were selling in the market at 97

Market Price= 33

In the books of Buffalo Corporation :

Transaction       Account Titles                  Debit               Credit

                                                                            $                           $    

1        Cash ( 2,000 x 1,000 x 101 %)            2,020,000  

             Discount on Bonds Payable                46,461  

                      Bonds Payable                                              2,000,000

            Paid-in Capital : Stock Warrants                                66,461

Bond issue proceeds proportionately allocated to bonds: $ 2,020,000 x 970 / (970 + 33) = $ 1,953,539.

Discount on bonds payable = $ 2,000,000 - $ 1,953,539 = $ 46,461

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