1. On December 31, 2016, Moss Co. issued $1,000,000 of 11% bonds at 109. Each $1,000 bond...

Question:

1. On December 31, 2016, Moss Co. issued $1,000,000 of 11% bonds at 109. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitled the bondholder to purchase one share of $5 par for $25. Immediately after issuance, the market value of each warrant was $4. On December 31, 2016, what amount should Moss record as discount or premium on issuance of bonds?
(a) $40,000 premium
(b) $90,000 premium
(c) $110,000 discount
(d) $200,000 discount
2. On July 31, 2016, Dome Co. issued $1,000,000 of 10%, 15-year bonds at par and used a portion of the proceeds to call its 600 outstanding 11%, $1,000 bonds, due on July 31, 2024, at 102. On that date, unamortized bond premium relating to the 11% bonds was $65,000. In its 2016 income statement, what amount should Dome report as gain or loss, before income taxes, from retirement of bonds?
(a) $53,000 gain
(b) $0
(c) ($65,000) loss
(d) ($75,000) loss
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...