Use the Following Information for Questions

question 16

Multiple Choice

Use the following information for questions.
On May 1, 2012, Payne Co.issued $300,000 of 7% bonds at 103, which are due on April 30, 2022.Twenty detachable share warrants entitling the holder to purchase for $40 one share of Payne's ordinary shares, $15 par value, were attached to each $1,000 bond.The bonds without the warrants would sell at 96.On May 1, 2012, the fair value of Payne's shares was $35 per share and of the warrants was $2.
-On May 1, 2012, Payne should record bonds at payable

• A)discount of $296,640.
• B)discount of $288,000.
• C)discount of $300,000.
• D)premium of $309,000.

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Definitions:

Cash Flows

The full measure of financial transactions entering and leaving a business, essentially shaping its liquidity factor.

Discounted Cash Flow

An investment appraisal technique that values a project or an asset based on the present value of its expected future cash flows.

Valuation

The process of determining the present value of an asset or a company based on earnings, assets, and market comparisons.

Required Return

The minimum expected yield by investors to justify the risk of the investment.