Indigo Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ
Indigo Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ. Indigo Corp. has issued 20,500 units. Each unit consists of a $1,025 par, 12% subordinated debenture and 21 shares of $10 par common stock. The units were sold to outside investors for cash at $1,804 per unit. Prior to this sale, the 2-week ask price of common stock was $82 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.
I am preparing the journal entries under the following conditions:
- Employing the incremental method
- Employing the proportional method,assuming the recent price quote on the common stock reflects fair value
Account title Debit Credit
1 Cash 36,982,000
Bonds payable 21,012,500
Common stock 4,305,000
Paid in capital in excess of par 11,664,500
common stock
2 Cash 36,982,000
Discount on bonds payable
Bonds payable 21,012,500
Common stock 4,305,000
Paid in capital in excess of par
common stock
On the second part of this question employing the proportional method can you help me with the calculation of discount on bonds payable and paid in capital in excess of par common stock? Thank you
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