On December 1, 2010, Lester Company issued at 103, two hundred of its 9%, $1,000

Question

On December 1, 2010, Lester Company issued at 103, two hundred of its 9%, $1,000 bonds. Attached to each bond was one detachable stock warrant entitling the holder to purchase 10 shares of Lester's common stock. On December 1, 2010, the market value
of the bonds, without the stock warrants, was 95, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be
A) $193,640.
B) $195,700.
C) $200,000.
D) $206,000.

Explanation / Answer

I completed a practice quiz with this question which shows the correct answer as $195,700.

$1000*1.30=$1,030

$1,030*200= $206,000

Then you subtract the $50 stock purchase warrant at initial market value of 103%

50*1.03=51.5 51.5*200=10,300

$206,000-$10,300=$195,700

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