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

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Salt Company issued 6,400 of its $1,000 par value bonds for $1,460, providing total cash proceeds...

Salt Company issued 6,400 of its $1,000 par value bonds for $1,460, providing total cash proceeds of $ 9,344,000. The market price of Salt's common shares on the date it issued the bonds is $ 23 per share. It sold the bonds with 352,000 detachable warrants to acquire 352,000 shares of the company's $ 2 par value common stock for $ 23 per share. That is, each bond carries 55 warrants x 6,400 bonds = 352,000 shares. Salt has existing...

A company issued $1000 par value 20- year zero coupon bonds on jan.1,2020. The purpose was...

A company issued $1000 par value 20- year zero coupon bonds on jan.1,2020. The purpose was to raise $100 million of funding for future development. Yield to Maturity on this bond is 3.5% 1. Calculate the total cash amount that the company needed to have available on the maturity date of jan.1,2040 to pay all the bondholders? 2. Use the IRS amortization rule to calculate the company's total interest expense for on the bonds for 2020/

On December 31, 20x0, a publicly accountable entity issued convertible bonds for total cash proceeds of...

On December 31, 20x0, a publicly accountable entity issued convertible bonds for total cash proceeds of $21,200,000. The bonds mature on December 31, 20x20 and each bond is convertible at the option of the bondholders at any time. Each $1,000 bond is convertible into 20 common shares. The face value of the bonds is $20,000,000 and pay an annual coupon of 3%. Coupon payment dates are June 30 and December 31. Bonds of similar risk would have yielded 2.8%. Required...

On January 15, 2012, TEX Consulting, Inc. issued some $1000 par value bonds. These bonds have...

On January 15, 2012, TEX Consulting, Inc. issued some $1000 par value bonds. These bonds have a coupon rate of 8.25% and the coupon payments are quarterly. On the original issue date, the bonds had 30 years to maturity and the original YTM on these bonds was 8.75%. Exactly one year after issue, these bonds traded at a price that resulted in a YTM of 6.25%. If you had bought one of these bonds on the issue date and sold...

Here are data on $1000 par value bonds issued by Microsoft, GE Capital, and Morgan Stanley....

Here are data on $1000 par value bonds issued by Microsoft, GE Capital, and Morgan Stanley. Assume you are thinking about buying these bonds. Answer the following questions: a. Assuming interest is paid annually, calculate the values of the bonds if your required rates of return are as follows: Microsoft, 6.5 percent; GE Capital,16.5 percent; and Morgan Stanley, 10 percent; where: MICROSOFT GE CAPITAL MORGAN STANLEY Coupon interest rate 5.25% 7.25% 8.00% Years to maturity; Microsoft 31. GE; 26 Morgan...

Earlier today, Alpha-Beta Inc. issued convertible bonds with $1000 par value and a conversion ratio of...

Earlier today, Alpha-Beta Inc. issued convertible bonds with $1000 par value and a conversion ratio of 20. What is the most likely market price for Alpha-Beta’s common stock currently? a.Less than $50 b.Between $50 and $100 c.$50 d.More than $100

OBJ Inc. issued $1000 par value, 17-year bonds at a coupon rate of 10.8 percent. These...

OBJ Inc. issued $1000 par value, 17-year bonds at a coupon rate of 10.8 percent. These bonds were issued 2 years ago. These bonds currently sell for 97 percent of par value and make semiannual payments. What is the YTM?

MC Qu. 120 A company issued... A company issued 5-year, 6% bonds with a par value...

MC Qu. 120 A company issued... A company issued 5-year, 6% bonds with a par value of $92,000. The company received $89,947 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is: Multiple Choice: $5,520.00. $5,930.60. $2,554.70. $2,965.30. $2,760.00. MC Qu. 122 A company issued... A company issued 11%, 5-year bonds with a par value of $150,000. The market rate when the bonds were issued was 12%. The company received $144,481...

Devon Limited is a company that has issued corporate bonds with a par value of $100...

Devon Limited is a company that has issued corporate bonds with a par value of $100 and a coupon rate of 11%. The Total Statement of Financial Position value of bonds is $50million. The company’s bonds are currently trading at a price of $103. Interest is payable annually in arrears. The maturity date is in four years time. The company has a target capital structure of 25% debt, 15% redeemable preference shares, 10% non-redeemable preference shares, and 50% in ordinary...

X Company issued at par 4-year term bonds with a par value of $100,000, dated January...

X Company issued at par 4-year term bonds with a par value of $100,000, dated January 1, 2020, and bearing interest at an annual rate of 6 percent payable annually on December 31. At the time of issue, the market rate for such bonds is 9 percent. X amortizes the discount or premium using effective interest rate method. Required: 1- Compute the selling price of bond. 2- Record the journal entry. 3- Prepare schedual of amortization. 4- Record the adjusting...

Subjects