Flounder Corporation is a regional company which is an SECregistrant. The corporationâs securities are thinly traded onNASDAQ. Flounder Corp. has issued 12,000 units. Each unit consistsof a $600 par, 12% subordinated debenture and 12 shares of $6 parcommon stock. The units were sold to outside investors for cash at$1,056 per unit. Prior to this sale, the 2-week ask price of commonstock was $48 per share. Twelve percent is a reasonable marketyield for the debentures, and therefore the par value of the bondsis equal to the fair value. (a) Prepare the journal entry to recordFlounderâs transaction, under the following conditions. (Roundanswers to 0 decimal places, e.g. $38,487. Credit account titlesare automatically indented when amount is entered. Do not indentmanually. If no entry is required, select "No Entry" for theaccount titles and enter 0 for the amounts.) (1) Employing theincremental method. (2) Employing the proportional method, assumingthe recent price quote on the common stock reflects fair value.
Flounder Corporation is a regional company which is an SECregistrant. The corporationâs securities are thinly traded onNASDAQ. Flounder Corp. has issued 12,000 units. Each unit consistsof a $600 par, 12% subordinated debenture and 12 shares of $6 parcommon stock. The units were sold to outside investors for cash at$1,056 per unit. Prior to this sale, the 2-week ask price of commonstock was $48 per share. Twelve percent is a reasonable marketyield for the debentures, and therefore the par value of the bondsis equal to the fair value. (a) Prepare the journal entry to recordFlounderâs transaction, under the following conditions. (Roundanswers to 0 decimal places, e.g. $38,487. Credit account titlesare automatically indented when amount is entered. Do not indentmanually. If no entry is required, select "No Entry" for theaccount titles and enter 0 for the amounts.) (1) Employing theincremental method. (2) Employing the proportional method, assumingthe recent price quote on the common stock reflects fair value.
