Pharoah, Inc. is an SEC registrant, and its securities are thinly traded on NASDAQ (National...
70.2K
Verified Solution
Link Copied!
Question
Accounting
Pharoah, Inc. is an SEC registrant, and its securities are thinly traded on NASDAQ (National Association of Securities Dealers Quotes). Pharoah, Inc. issued 10,000 units. Each unit consists of a $ 1,000 par, 16% subordinated debenture and 5 shares of $ 5 par common stock. The investment banker has retained 580 units as the underwriting fee. The other 9,420 units were sold to outside investors for cash at $ 1,146 per unit. Prior to this sale the 2-week ask price of common stock was $ 25 per share. Sixteen 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 the previous 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.)
(1)
Employing the incremental method, assuming that the recent price quotes on the commont stock do not reflect fair value.
(2)
Employing the proportional method, assuming the recent price quotes on the common stock reflect fair value.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
