Issued $3 million of 10% nonconvertible bonds at 104. The bonds are due on July 31,...
Issued $3 million of 10% nonconvertible bonds at 104. The bonds are due on July 31, 2041. Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $60, one share of no par common stock. The market value of the common stock was $58 per share and the market value of the stock warrant was $8. What are the journal entries?
Homework Answers
Issue size = $3 million
No of bonds issued = Issue size / Face Value of bond
= $3 million / $1,000 = 3,000
No of warrants = No of bonds issued * No of detachable warrants per bond
= 3000 * 20 = 60,000
Journal entry:
| Account | Debit | Credit |
| Cash (3 million * 104%) | 3120000 | |
| Discount on bonds | 360000 | |
| Bonds payable | 3000000 | |
| Equity stock warrant (60000 * 8) | 480000 |
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