Whispering company lost most of its inventory in a fire in december just before the year-end physical inventory was taken. the corporation’s books disclosed the following. beginning inventory $172,400 sales revenue $671,100 purchases for the year 389,000 sales returns 23,900 purchase returns 28,600 rate of gross profit on net sales 30 % merchandise with a selling price of $20,100 remained undamaged after the fire. damaged merchandise with an original selling price of $15,200 had a net realizable value of $5,600.

Mae jong corp. issues $1,000,000 of 10% bonds payable which may be converted into 10,000 shares of $2 par value ordinary shares. the market rate of interest on similar bonds is 12%. interest is payable annually on december 31, and the bonds were issued for total proceeds of $1,000,000. in accounting for these bonds, mae jong corp. will: (a) first assign a value to the equity component, then determine the liability component. (b) assign no value to the equity component since the conversion privilege is not separable from the bond.(c) first assign a value to the liability component based on the face amount of the bond.(d) use the “with-and-without” method to value the compound instrument.