Asked by Karan Kahlon on May 27, 2024
Verified
The portion of proceeds from the sale of bonds with detachable stock warrants attributable to the warrants is accounted for as a(n)
A) additional paid-in capital account
B) common stock account
C) contra-liability account
D) adjunct-liability account
Detachable Stock Warrants
Financial instruments that grant the holder the right to purchase company stock at a specified price and are separable from the bond or stock with which they were issued.
Additional Paid-In Capital
Additional paid-in capital refers to the amount of money investors have paid for shares in a company over and above the stated par value of the shares.
- Understand and apply the accounting treatment for the exercise or expiration of stock warrants included with bond issuance.
Verified Answer
RE
Roosevelt EmileJun 02, 2024
Final Answer :
A
Explanation :
The portion of proceeds from the sale of bonds with detachable stock warrants that is attributable to the warrants is accounted for as additional paid-in capital. This is because the amount received for the warrants is in excess of the fair value of the bonds alone, and therefore represents a contribution by the purchaser of the warrants to the issuing company's equity.
Learning Objectives
- Understand and apply the accounting treatment for the exercise or expiration of stock warrants included with bond issuance.