2019 AICPA released FAR MCQ Help

  • Creator
    Topic
  • April 17, 2019 at 7:42 pm #2336430
    YouTooShallPass
    Participant

    Jeff posted in the DOJO study group, can someone walk me through this one?

    New AICPA 2019 MCQ:

    A corporation recently issued $4 million of 10-year, 3% bonds at 101. There were 200,000 detachable stock warrants included as part of the sale. Each warrant allows the bondholder to purchase one share of no par common stock for $12 per share. On the date of issuance, the stock warrants had a fair value of $1 per warrant. By what amount did the corporation’s long-term debt increase as a result of this issuance?

    A. $3,840,000

    B. $4,000,000

    C. $4,040,000

    D. $4,200,000

    AUD - 89
    BEC - 89
    FAR - 82
    REG - 83
    The end is near
Viewing 6 replies - 1 through 6 (of 6 total)
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  • April 17, 2019 at 10:37 pm #2336712
    Asja
    Participant

    BUmp

    “The strongest of all warriors are these two — Time and Patience.” ― Leo Tolstoy (War and Peace)
    April 25, 2019 at 8:15 pm #2354184
    Keycat
    Participant

    I'd say A is correct. The FV of detachable warrants (200K) goes to APIC. The total proceeds from sale are 4,040K. 4,040 – 200 = 3,840 which is the L-T debt portion.

    AUD - 77
    BEC - 83
    FAR - 81
    REG - 85
    going on
    August 8, 2019 at 10:07 am #2616438
    jflorida
    Participant

    Hi Keycat. Ty. Would you tell me how you got 4,040 as proceeds from sale?

    THANKS

    August 9, 2019 at 2:35 am #2618220
    Lidis
    Participant

    Hello
    4,000,000/1,000=4,000
    4,000 X 101% = 4,040,000

    October 2, 2019 at 3:01 pm #2733612
    Angela
    Participant

    Hi,

    The answer that was provided was A. Does anyone know how that was calculated?

    October 2, 2019 at 3:56 pm #2733699
    etg1991
    Participant

    4,000,000 x 1.01 = 4,040,000 – 200,000 (Detachable warrants go to equity, so you're taking them out of your Long Term Debt) = 3,840,000

    AUD - 75
    BEC - NINJA in Training
    FAR - 75
    REG - 84
    Success is not final, failure is not fatal: it is the courage to continue what counts - Winston Churchill
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