On March 1, 2020, Rabat Corp

question 25

Multiple Choice

On March 1, 2020, Rabat Corp. sold $ 300,000 (par value) , 20 year, 8% bonds at 104. Each $ 1,000 bond was issued with 25 detachable warrants, each of which entitled the bondholder to purchase for $ 50 one of Rabat's no par value common shares. The bonds without the warrants would normally sell at 95. At this time, the market value of Rabat's common shares was $ 40 per share and the market value of each warrant was $ 2.00. Using the relative fair value method, what amount should Rabat record on March 1, 2020 as Contributed Surplus-Stock Warrants?

• A) $ 10,800
• B) $ 12,600
• C) $ 15,000
• D) $ 15,600

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Definitions:

Soviet Union

A former federal socialist state in northern Eurasia that existed from 1922 to 1991, officially known as the Union of Soviet Socialist Republics (USSR).

Resource Market

A market in which households sell and firms buy resources or the services of resources.

Financial Capital

Refers to the funds provided by lenders (and investors) to businesses to purchase real capital equipment for producing goods/services.