In: Accounting
On April 1, 2018, Windel Corporation issued bonds with detachable warrants.
Information related to these bonds is shown below:
Face value of bonds $325,000
Stated rate of interest 8%
Bonds issued at 106%
Each $1,000 bond was sold with 20 detachable warrants
Each warrant allowed the investor to purchase one share of common stock for $16
The par value of the common stock is $4.00
On April 1, 2018 the market values were:
Common stock $12
Warrants $7
In February 2023, some of the warrants were exercised. The percentage of warrants exercised was 20%
Bond #2: On January 1, 2016, Windel sold the following bonds:
Maturity value $850,000
Stated rate of interest 9%
Effective rate of interest 8%
Interest is paid each December 31
Maturity date January 1, 2021
On December 31, 2018, Windel redeemed (called) some of the bonds:
Call premium 105%
Percentage of bonds redeemed 40%
Required:
a. With respect to Bond #2:
1. Prepare an amortization schedule for the bonds.