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On March 1, 2018, E Corp. issued $1,000,000 of 10% nonconvertible bonds at 103, due on...
On March 1, 2018, E Corp. issued $1,000,000 of 10% nonconvertible bonds at 103, due on February 28, 2028. Each $1,000 bond was issued with 30 detachable stock warrants, each of which entitled the holder to purchase, for $50, one share of Evan's $25 par common stock. On March 1, 2018, the market price of each warrant was $4. By what amount should the bond issue proceeds increase shareholders' equity?
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Expert Solution
| Total Par value of bond | 1,000,000.00 | ||||||
| Interest rate | 10% | Workings | Total Par value of bond | 1,000,000.00 | A | ||
| Issue Price | 103.00 | No. Of warrants issued per $ 1000 bond | 30.00 | B | |||
| No. Of warrants issued per $ 1000 bond | 30.00 | No of bonds of $1000 from total | 1,000.00 | C=A/1000 | |||
| No. Of warrants issued |
|
D | No. Of warrants issued | 30,000.00 | D=C*B | ||
| Market price of warrants | 4.00 | E | |||||
| Amount to be credited to shareholders equity | 120,000.00 | F=D*E |
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