On December 1, 2016, 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, 2016, 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 bonds were issued at 103, so the total proceeds were $206,000 (200 bonds x $1,000 x 1.03). The fair value of the bonds without warrants is 95% of $200,000, which is $190,000. The fair value of the warrants is $10,000 (200 warrants x $50). The initial carrying value of the bonds is the fair value of the bonds without the warrants, which is $190,000.

On December 1, 2016, Lester Company Issued at 103, Two