During 2016, Gordon Company issued at 104 three hundred, $1,000 bonds due in ten years.One detachable share warrant entitling the holder to purchase 15 shares of Gordon's ordinary shares was attached to each bond.At the date of issuance, the market value of the bonds, without the share warrants, was quoted at 96.The fair value of each detachable warrant was quoted at $40.What amount, if any, of the proceeds from the issuance should be accounted for as part of Gordon's equity?

Question

Quizplus · Accepted Answer

The fair value of the detachable warrants is $40 each. With 300 bonds, there are 300 warrants. Therefore, the equity portion is 300 warrants x $40 = $12,000.

During 2016, Gordon Company Issued at 104 Three Hundred, $1,000