Stock Warrants
- Account for separately: Two methods
FMV Purchase cost Carrying Value
C/S $8,000 (8/11) $10,000 $7,273
Warrants 3,000 (3/11) 10,000 2,727
Incremental method. Used when only one security has a market value. Assume in this case only common is known.
- Received $10,000. Allocate $8,000 to common stock.
- Allocate the remainder $2,000 to warrants
- If neither has a FMV then Board of Directors will set a value.