ABC Co. is authorized to issue 1,000,000 ordinary shares with a $5 par value and 100,000, 6% preference shares with a $20 par value. The company is considering financing a large expansion project that is expected to bring sustainable growth to the company. The company's investment banker has suggested that the company takes advantage of both equity and debt financing. He proposed that the company sells securities to investors called HYBRID. Each unit of HYBRID consists of: (1) a $1,000 face value, 10% stated rate, 5-years bond, which pays interest annually, and (2) 20 ordinary shares. On January 1, 2017, the company issued 500 units of HYBRID for a price of $1,200 per unit. The company paid 50 units of HYBRID to the Investment banker as underwriting fees. Assume that the effective market rate was 12% and that ordinary shares have an appraisal value of $15 per share. Required: For ABC Co.: LOR S Prepare the necessary journal entry(ies) to record the issue of HYBRID units on January 1, 2017.

ABC Co. is authorized to issue 1,000,000 ordinary shares with a $5 par value and 100,000, 6% preference shares with a $20 par value. The company is considering financing a large expansion project that is expected to bring sustainable growth to the company. The company's investment banker has suggested that the company takes advantage of both equity and debt financing. He proposed that the company sells securities to investors called HYBRID. Each unit of HYBRID consists of: (1) a $1,000 face value, 10% stated rate, 5-years bond, which pays interest annually, and (2) 20 ordinary shares. On January 1, 2017, the company issued 500 units of HYBRID for a price of $1,200 per unit. The company paid 50 units of HYBRID to the Investment banker as underwriting fees. Assume that the effective market rate was 12% and that ordinary shares have an appraisal value of $15 per share. Required: For ABC Co.: LOR S Prepare the necessary journal entry(ies) to record the issue of HYBRID units on January 1, 2017.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 1C

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ABC Co. is authorized to issue 1,000,000 ordinary shares with a $5 par value and 100,000,6% preference shares with a $20 par value. The company is considering financing a largeexpansion project that is expected to bring sustainable growth to the company. Thecompany’s investment banker has suggested that the company takes advantage of bothequity and debt financing. He proposed that the company sells securities to investorscalled HYBRID. Each unit of HYBRID consists of: (1) a $1,000 face value, 10% stated rate,5-years bond, which pays interest annually, and (2) 20 ordinary shares. On January 1,2017, the company issued 500 units of HYBRID for a price of $1,200 per unit. Thecompany paid 50 units of HYBRID to the Investment banker as underwriting fees. Assumethat the effective market rate was 12% and that ordinary shares have an appraisal valueof $15 per share Prepare the necessary journal entry(ies) to record the issue of HYBRID units on January1, 2017.
ABC Co. is authorized to issue 1,000,000 ordinary shares with a $5 par value and 100,000, 6% preference shares with a $20 par value. The company is considering financing a large expansion project that is expected to bring sustainable growth to the company. The company’s investment banker has suggested that the company takes advantage of both equity and debt financing. He proposed that the company sells securities to investors called HYBRID. Each unit of HYBRID consists of: (1) a $1,000 face value, 10% stated rate, 5-years bond, which pays interest annually, and (2) 20 ordinary shares. On January 1, 2017, the company issued 500 units of HYBRID for a price of $1,200 per unit. The company paid 50 units of HYBRID to the Investment banker as underwriting fees. Assume that the effective market rate was 12% and that ordinary shares have an appraisal value of $15 per share. Required: For ABC Co.: Prepare the necessary journal entry(ies) to record the issue of HYBRID units on January 1, 2017.
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