Asked by Miguel Avalos on Jul 28, 2024
Verified
Hoosier Co.sold $300, 000 of 10% bonds for $311, 600.Each $1, 000 bond carried ten warrants and each warrant allowed the holder to acquire one share of $10 par value common stock for $25 a share.After the issuance of the securities, the bonds were quoted at 103.5 and each warrant was quoted at $9.
Required:
Prepare the entry to record the sale of the bonds.
Warrants
Securities that grant the holder the right to purchase a company's stock at a specific price before the warrant expires, similar to stock options but typically with longer durations.
Par Value
A nominal face value assigned to shares of stock by the issuing company, which often bears no relation to the market value.
Common Stock
Common stock represents shares of ownership in a corporation, giving holders voting rights and a share in the company’s profits through dividends.
- Gain proficiency in capturing and communicating different aspects of bond transactions, like issuance, interest expense calculations, discount or premium amortization, and redemption.
- Learn to record financial transactions involving bonds with detachable or convertible features.
Verified Answer
$300,000×1.035($300,000×1.035)+(300×10×$9)×$311,600=$286,672\frac { \$ 300,000 \times 1.035 } { ( \$ 300,000 \times 1.035 ) + ( 300 \times 10 \times \$ 9 ) } \times \$ 311,600 = \$ 286,672($300,000×1.035)+(300×10×$9)$300,000×1.035×$311,600=$286,672 to bonds payable
$300,000−$286,672=$13,328\$ 300,000 - \$ 286,672 = \$ 13,328$300,000−$286,672=$13,328 to discount
300×10×$9(300,000×1.035)+(300×10×$9)×$311,600=$24,928\frac { 300 \times 10 \times \$ 9 } { ( 300,000 \times 1.035 ) + ( 300 \times 10 \times \$ 9 ) } \times \$ 311,600 = \$ 24,928(300,000×1.035)+(300×10×$9)300×10×$9×$311,600=$24,928 to warrants
Learning Objectives
- Gain proficiency in capturing and communicating different aspects of bond transactions, like issuance, interest expense calculations, discount or premium amortization, and redemption.
- Learn to record financial transactions involving bonds with detachable or convertible features.
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