Question
On July 1 of Year 1, Salem Corporation authorized $1,400,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually each June
On July 1 of Year 1, Salem Corporation authorized $1,400,000 of 7% bonds due in 10 years. The bonds pay cash interest semiannually each June 30 and December 31. Each $1,000 bond includes a detachable stock purchase warrant. Each warrant gives the bondholder the right to purchase, for $30, one share of $1 par value common stock at any time during the next 10 years. The bonds were sold at 101 on July 1 of Year 1. The value of the stock purchase warrants at the time of issuance was $70,000. The bonds would sell without warrants at $ $1,358,000. a. Record the entry for issuance of bonds on July 1 of Year 1 using the proportional method. Note: Carry all decimals in calculations; round the finalanswer to the nearest dollar. This means that your allocation ratio should not be rounded--use no less than four decimal places such as 0.8102.
b. Record the entry for issuance of bonds on July 1 of Year 1 assuming instead that the warrants are not detachableStep by Step Solution
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