A is corrent. ASC Topic 470 states that the proceeds of bonds issued with detachable stock warrants should be allocated to the bonds and warrants based upon relative fair market values at the time of issuance and accounted for separately.FMV of bonds without warrants
FMV of bonds and warrants | x | Purchase
price | = | Amount assigned
to bonds |
$1,040,000
$1,060,000 | x | $1,060,000 | = | $1,040,000 |
The bond premium is equal to $40,000 ($1,040,000 proceeds from issue of bonds - $1,000,000 face value of bonds).B is incorrect. ASC Topic 470 states that the proceeds of bonds issued with detachable stock warrants should be allocated to the bonds and warrants based upon relative fair market values at the time of issuance and accounted for separately.FMV of bonds without warrants
FMV of bonds and warrants | x | Purchase
price | = | Amount assigned
to bonds |
$1,040,000
$1,060,000 | x | $1,060,000 | = | $1,040,000 |
The bond premium is equal to $40,000 ($1,040,000 proceeds from issue of bonds - $1,000,000 face value of bonds).C is incorrect. ASC Topic 470 states that the proceeds of bonds issued with detachable stock warrants should be allocated to the bonds and warrants based upon relative fair market values at the time of issuance and accounted for separately.FMV of bonds without warrants
FMV of bonds and warrants | x | Purchase
price | = | Amount assigned
to bonds |
$1,040,000
$1,060,000 | x | $1,060,000 | = | $1,040,000 |
The bond premium is equal to $40,000 ($1,040,000 proceeds from issue of bonds - $1,000,000 face value of bonds).D is incorrect. ASC Topic 470 states that the proceeds of bonds issued with detachable stock warrants should be allocated to the bonds and warrants based upon relative fair market values at the time of issuance and accounted for separately.FMV of bonds without warrants
FMV of bonds and warrants | x | Purchase
price | = | Amount assigned
to bonds |
$1,040,000
$1,060,000 | x | $1,060,000 | = | $1,040,000 |
The bond premium is equal to $40,000 ($1,040,000 proceeds from issue of bonds - $1,000,000 face value of bonds). |
