Exhibit 14-8 Marvin Corp.issued $500, 000 of its ten-year 6% bonds at 104.Each $1, 000 bond carries ten warrants.Each warrant allows the holder to purchase one share of $10 par common stock for $50.Following the sale, relevant market values were:
$\begin{array}{ll}
\text { Bonds } & \$ 980 \text { (ex rights) } \
\text { Warrants } & \$ 14 \text { each } \
\text { Common stock } & \$ 60 \text { each }
\end{array}$

-Refer to Exhibit 14-8.The entry to record the sale of the bonds would include a

Question

Exhibit 14-8 Marvin Corp.issued $500, 000 of its ten-year 6% bonds at 104.Each $1, 000 bond carries ten warrants.Each warrant allows the holder to purchase one share of $10 par common stock for $50.Following the sale, relevant market values were:
$\begin{array}{ll}
\text { Bonds } & \$ 980 \text { (ex rights) } \
\text { Warrants } & \$ 14 \text { each } \
\text { Common stock } & \$ 60 \text { each }
\end{array}$
 
-Refer to Exhibit 14-8.The entry to record the sale of the bonds would include a

Quizplus · Accepted Answer

The bonds were issued at 104, which means they were sold for $520,000 (104% of $500,000). The market value of the bonds without warrants is $490,000 (500 bonds x $980). The value of the warrants is $30,000 (500 bonds x 10 warrants x $14). The total market value is $520,000 ($490,000 + $30,000). The allocation to the warrants is $30,000/$520,000 x $520,000 = $30,000. Therefore, the credit to Common Stock Warrants is $30,000.

Exhibit 14-8 Marvin Corp -Refer to Exhibit 14-8