Problem 16-1 (Part Level Submission) The stockholders' equity section of Sweet Inc. at the beginning of the current year appears below. Common stock, $10 par value, authorized 995,000 shares, 309,000 shares issued and outstanding Paid-in capital in excess of par-common stock Retained earnings $3,090,000 623,000 539,000 During the current year, the following transactions occurred. 1. The company issued to the stockholders 102,000 rights. Ten rights are needed to buy one share of stock at $30. The rights were void after 30 days. The market price of the stock at this time was $32 per share 2. The company sold to the public a $188,000, 10% bond issue at 104. The company also issued with each $100 bond one detachable stock purchase warrant, which provided for the purchase of common stock at $28 per share. Shortly after issuance, similar bonds without warrants were selling at 96 and the warrants at $8. 3. All but 5,100 of the rights issued in (1) were exercised in 30 days. 4. At the end of the year, 80% of the warrants in (2) had been exercised, and the remaining were outstanding and in good standing. 5. During the current year, the company granted stock options for 9,300 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $10. The option price is $28. The options were to expire at year-end and were considered compensation for the current year. 6. All but 930 shares related to the stock-option plan were exercised by year-end. The expiration resulted because one of the executives failed to fulfill an obligation related to the employment contract. No. Account Titles and Explanation Debit Credit 1. No Entry 2. Cash 195520 Discount on Bonds Payable 7520 Bonds Payable 188000 Paid-in Capital-Stock Warrants 15040 3. Cash 3100800 Common Stock 4. Paid-in Capital-Stock Warrants 1880 Cash 5. 5. 6. For options exercised: For options lapsed