Final answer:
The initial carrying value of the Lester Company's bonds payable is calculated by multiplying the face value of the bonds by the issuance price percentage and the number of bonds issued. The calculation does not consider the value of detachable stock warrants.
Step-by-step explanation:
The student has asked how to calculate the initial carrying value of Lester Company's bonds payable at the date of issuance. On December 1, 2025, Lester Company issued 800 bonds at 9%, $1,000 face value, at a price of 103. Each bond had one detachable stock warrant, which could be used to purchase 10 shares of Lester's common stock. The market value of the bonds without the stock warrants was 95, and each stock warrant had a market value of $50.
Since the bonds are issued at 103, this means they are issued at 103% of the face value. Therefore, the carrying value of the bonds is calculated as $1,000 (face value) × 103% × 800 (number of bonds). This does not consider the detachable stock warrants. Since the value of the stock warrants is given to be $50 each, we could allocate the amount paid for the bonds vs. the warrants based on their respective market values. However, that specific allocation is not the focus of this particular question, which concentrates on the initial carrying value of the bonds payable.