On April 1,2016,Austere Corporation issued $300,000 of 10% bonds at 105.Each $1,000 bond was sold with 25 detachable stock warrants,each permitting the investor to purchase one share of common stock for $17.On that date,the market value of the common stock was $15 per share and the market value of each warrant was $2.Austere should record what amount of the proceeds from the bond issue as an increase in liabilities?

Question

Quizplus · Accepted Answer

The proceeds from the bond issue should be recorded at the face value of the bonds of $300,000. The detachable stock warrants do not affect the liability amount, as they are considered equity transactions. Therefore, Austere should record $300,000 as an increase in liabilities.

On April 1,2016,Austere Corporation Issued $300,000 of 10% Bonds at 105.Each