Question

During 2010, Gordon Company issued at 104 three hundred, $1,000 bonds due in ten years. One detachable stock warrant entitling the holder to purchase 15 shares of Gordon's common stock was attached to each bond. At the date of issuance, the market value of the bonds, without the stock warrants, was quoted at 96. The market 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 stockholders' equity?

a. $0
b. $12,000
c. $12,480
d. $11,856

Answer 1

The proceeds from the issuance of the bonds should be accounted for as part of Gordon's stockholders' equity.

Step-by-step explanation:

The proceeds from the issuance of the bonds should be accounted for as part of Gordon's stockholders' equity.

First, we need to calculate the total value of the bonds. Each bond is issued at $1,000 and there are 300 bonds, so the total value of the bonds is $1,000 * 300 = $300,000.

Next, we need to calculate the total value of the stock warrants. Each warrant has a market value of $40 and there are 300 bonds, so the total value of the stock warrants is $40 * 300 = $12,000.

Therefore, the total proceeds from the issuance that should be accounted for as part of Gordon's stockholders' equity is $300,000 + $12,000 = $312,000.