Question
In: Accounting
On August 1, 2019, United Corporation issued $9.20 million of 8% bonds at 105. The bonds...
On August 1, 2019, United Corporation issued $9.20 million of 8%
bonds at 105. The bonds mature in 20 years. Each $1,000 bond was
issued with 20 detachable stock warrants, each of which entitled
the bondholder to purchase, for $42, one share of United $5 par
common stock. World Company purchased 10% of the bond issue. On
August 1, 2019, the market value per share for United stock was $48
and the market value of each warrant was $6. In March 2025, when
United common stock had a market price of $62 per share and the
unamortized premium balance was $220,000, World exercised the
warrants it held.
Required:
1. Prepare the journal entries on August 1, 2019,
to record (A) the issuance of the bonds by United and (B) the
investment by World.
2. Prepare the journal entries for both companies
in March 2025 to record the exercise of the warrants.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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