Faith evans corporation is a regional company which is an sec registrant. the corporation's securities are thinly traded on nasdaq. faith evans corp. has issued 10,000 units. each unit consists of a $500 par, 12% subordinated debenture and 10 shares of $5 par common stock. the investment banker has retained 400 units as the underwriting fee. the other 9,600 units were sold to outside investors for cash at $880 per unit. prior to this sale, the 2-week ask price of common stock was $40 per share. twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value.

The journal entries to record Evan's transaction is as follows:  

Employing the incremental method.

Unamortized Bon      200,000
Cash                       8,448,000
              Bonds Payable                 5,000,000
              Common Stock                   500,000
              Paid-in Capital in E          3,148,000

Employing the proportional method, assuming the recent price quote on the common stock reflects fair value.

Cash                     8,448,000
Unamortized Bon    195,556
Discount on Bond     111,111
              Bonds Payable         5,000,000
             Common Stock             500,000
             Paid-in Capital in E    3,254,667

The correct answer is step.

The answer is product modification