Question

Bonds with detachable stock warrants

a) what is a detachable stock purchase warrant?

b) How are the warrants accounted for at the date of the issuance of the bonds?

c) Why is this accounting treatment different from the accounting for the conversion option on convertible bonds? Do you think it makes sense to treat these two situations (conversion option v. detachable stock warrants) differently? Why or why not?

Answer 1

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