Question
In: Accounting
Redmond Company issued 4000 of its $1000 par value bonds for $1500, providing total cash proceeds...
Redmond Company issued 4000 of its $1000 par value bonds for $1500, providing total cash proceeds of $6,000,000. There are no bond issue costs. The market price of Redmond's common shares on the date that the bonds were issued was $55 per share. The bonds were sold with 140,000 warrants to acquire 140,000 shares of the company's $5 par value common stock for $65 per share. That is, each bond carries 35 warrants. Redmond has existing bonds outstanding that currently trade without warrants at $1,190. There are other Redmond warrants outstanding that trade for $50 each. Assume that the fair value of the bonds is more reliable than the market value of the warrants.
Requirement A.
Prepare the journal entry to record issuance of the bonds assuming that the warrants are nondetachable.
| Account | Date of Issue |
| Proper account | Debit | |
| Proper account | Credit | |
Requirement B.
Prepare the journal entry to record the issuance of the bonds assuming that the warrants are detachable using the proportional method.
| Account | Date of Issue |
| Proper account | Debit | |
| Proper account | Credit | |
Requirement C.
Prepare the journal entry to record the issuance of the bonds assuming that the warrants are detachable using the incremental method.
| Account | Date of Issue |
| Proper account | Debit | |
| Proper account | Credit | |
Requirement D.
Assuming that the incremental method is used, prepare the journal entry required to record the exercise of all warrants.
| Account | Date of Issue |
| Proper account | Debit | |
| Proper account | Credit | |
Solutions
ekkarill92 answered 2 years agoRelated Solutions
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