Tim Howard Gloves issued 4.75% bonds with a face amount of $24 million, together with 4 million shares of its $1 par common stock, for a combined cash amount of $44 million. The fair value of Howard's stock cannot be determined. The bonds would have sold for $18 million if issued separately. For this transaction, Howard should record paid-in capital-excess of par in the amount of:
A) $26 million
B) $22 million
C) $18 million
D) $16 million

Question

Quizplus · Accepted Answer

$26 million ($44 - 18) would be allocated to the common stock. The Common stock account would be credited for $4 million, with the remaining $22 million credited to paid-in capital-excess of par.

Tim Howard Gloves Issued 4