On December 1, 2012, Lester Company issued at 103, two hundred of its 9%, $1,000 bonds.Attached to each bond was one detachable share warrant entitling the holder to purchase 10 shares of Lester's ordinary shares.On December 1, 2012, the fair value of the bonds, without the share warrants, was 95, and the fair value of each share warrant was $50.The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be

Question

Quizplus · Accepted Answer

The initial carrying value of the bonds payable should be the fair value of the bonds without the share warrants, which is $95 per bond. Therefore, the initial carrying value of the bonds payable is calculated as follows:

200 bonds x $1,000 per bond x 0.95 = $190,000

The fair value of the share warrants does not affect the carrying value of the bonds payable.

On December 1, 2012, Lester Company Issued at 103, Two