E15-3(Stock Issued for Land) Twenty-five thousand shares reacquired by Elixir Corporation for $53 per share were exchanged for undeveloped land that has an appraised value of $1,700,000. At the time of the exchange the common stock was trading at $62 per share on an organized exchange.

Hint: (LO 3)

Instructions

a.
Prepare the journal entry to record the acquisition of land assuming that the purchase of the stock was originally recorded using the cost method.

b.
Briefly identify the possible alternatives (including those that are totally unacceptable) for quantifying the cost of the land and briefly support your choice.

(a) Land ($62 X 25,000) 1,550,000 Treasury Stock ($53 X 25,000) 1,325,000 Paid-in Capital from Treasury Stock 225,000

(b) One might use the cost of treasury stock. However, this is not a relevant measure of this economic event. Rather, it is a measure of a prior, unrelated event. The appraised value of the land is a reasonable alternative (if based on appropriate fair value estimation techniques). However, it is an appraisal as opposed to a market-determined price. The trading price of the stock is probably the best measure of fair value in this transaction.

E16-1(Issuance and Conversion of Bonds) For each of the unrelated transactions described below, present the entry(ies) required to record each transaction.
1.
Grand Corp. issued $20,000,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company's investment banker estimates they would have been sold at 95. Expenses of issuing the bonds were $70,000.

2.
Hoosier Company issued $20,000,000 par value 10% bonds at 98. One detachable stock purchase warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $4.

3.
Sepracor, Inc. called its convertible debt in 2007. Assume the following related to