Exercise 154 Faith Evans Corporation is a regional company w

Exercise 15-4

Faith Evans Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ. Faith Evans Corp. has issued 11,150 units. Each unit consists of a $558 par, 12% subordinated debenture and 11 shares of $6 par common stock. The investment banker has retained 446 units as the underwriting fee. The other 10,704 units were sold to outside investors for cash at $981 per unit. Prior to this sale, the 2-week ask price of common stock was $45 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value.

(a) Prepare the journal entry to record Evans’ transaction, under the following conditions. (Round answers to 0 decimal places, e.g. $38,487. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select \"No Entry\" for the account titles and enter 0 for the amounts.)

Solution

Journal Entry Account Titles Debit Credit Unammortised Bond             2,48,868 Cash a/c         105,00,624 To, Bond 62,21,700 To, Stock     7,35,900 To, Paid in Capital 37,91,892 Unammortised bond= =446*558             2,48,868 Cash=         105,00,624 =10704*981 Bond =11150*558           62,21,700 Stock =11150*11*6             7,35,900 Note- Best effort have been made to answer the question correctly, in case of any discrepencies kindly comment and i will try to resolve it as soon as possible. Please provide positive feedback.