Antigone Corp. issued bonds with detachable common stock warrants. Only the bonds had a known market value. Using the residual method, the value attributable to the warrants is reported as
A) Stock Warrants Distributable.
B) Other Comprehensive Income.
C) Common Shares Subscribed.
D) Contributed Surplus-Stock Warrants.

Question

Quizplus · Accepted Answer

According to the residual method, the value of the bonds is subtracted from the total market value of the bonds and warrants to arrive at the value of the warrants. This residual value belongs to the equity holders, not the debt holders, and therefore, it is credited to Contributed Surplus-Stock Warrants.