Question
In: Accounting
On August 1, 2018, Limbaugh Communications issued $22 million of 11% nonconvertible bonds at 105. The...
On August 1, 2018, Limbaugh Communications issued $22 million of
11% nonconvertible bonds at 105. The bonds are due on July 31,
2038. Each $1,000 bond was issued with 40 detachable stock
warrants, each of which entitled the bondholder to purchase, for
$50, one share of Limbaugh Communications’ no par common stock.
Interstate Containers purchased 20% of the bond issue. On August 1,
2018, the market value of the common stock was $48 per share and
the market value of each warrant was $10.
In February 2029, when Limbaugh’s common stock had a market price
of $62 per share and the unamortized discount balance was $2
million, Interstate Containers exercised the warrants it held.
Required:
1. Prepare the journal entries on August 1,
2018, to record (a) the issuance of the bonds by Limbaugh and (b)
the investment by Interstate.
2. Prepare the journal entries for both Limbaugh
and Interstate in February 2029, to record the exercise of the
warrants.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
On August 1, 2018, Limbaugh Communications issued $22 million of 11% nonconvertible bonds at 105. The...
On August 1, 2018, Limbaugh Communications issued $22 million of
11% nonconvertible bonds at 105. The bonds are due on July 31,
2038. Each $1,000 bond was issued with 40 detachable stock
warrants, each of which entitled the bondholder to purchase, for
$50, one share of Limbaugh Communications’ no par common stock.
Interstate Containers purchased 20% of the bond issue. On August 1,
2018, the market value of the common stock was $48 per share and
the market value of...
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