On April 1, 2013, Austere Corporation issued $300,000 of 10% bonds at 105. Each $1,000 bond was sold with 25 detachable stock warrants, each permitting the investor to purchase one share of common stock for $17. On that date, the market value of the common stock was $15 per share and the market value of each warrant was $2. Austere should record what amount of the proceeds from the bond issue as an increase in liabilities?

Question

Quizplus · Accepted Answer

The amount of the proceeds from the bond issue that should be recorded as an increase in liabilities is the face amount of the bonds, which is $300,000. The fact that the bonds were sold with detachable stock warrants has no impact on the initial recording of the bonds.

On April 1, 2013, Austere Corporation Issued $300,000 of 10