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-   -   Journal entry of bonds with detachable warrants (https://www.askmehelpdesk.com/showthread.php?t=317315)

  • Feb 14, 2009, 02:38 PM
    cinnababy
    journal entry of bonds with detachable warrants
    On August 1, 2009, Limbaugh Communications issued $30 million of 10% nonconvertible bonds at 104. The bonds are due on July 31, 2029. Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $60, one share of Limbaugh Communications’ $10 par common stock. Interstate Containers purchased 20% of the bond issue. On August 1, 2009, the market value of the common stock was $58 per share and the market value of each warrant was $8.
    In February, 2020, when Limbaugh’s common stock had a market price of $72 per share and the unamortized discount balance was $1 million, Interstate Containers exercised the warrants it held.
    Prepare the journal entry for Limbaugh in February, 2020, to record the exercise of the warrants.
  • Feb 18, 2009, 03:13 PM
    littleme3
    Ac
  • Jul 4, 2010, 04:07 AM
    yuanhangqdsd
    On August 1, 2009, Record of the bond and warrant:

    DE: Cash (30millions*104%) $31.2M
    DE: Discount on Bond Payable (Plug) $ 3.6M
    CR: Additional Paid In Capital -- Stock Warrants (FMV of Warrants: $30M/$1000*20*$8) $4.8M
    CR: Bond Payable (Carried at its Face Value) $ 30M

    On February, 2020, Exercise of the warrants - Only 20% of Warrants excercised

    DE: Cash ($60*$30M/$1000*20*20%) $ 7.2M
    DE: Add. PIC -- Stock Warrants (20%*4.8M) $.975M
    CR: Common Stock at Par ($10*$30M/$1000*20*20%) $ 1.2M
    CR: Add. PIC -- Excess of Par (Plug) $6.975M
  • Jul 7, 2010, 12:48 AM
    morgaine300

    yuanhangqdsd, please read our guidelines about posting homework:
    https://www.askmehelpdesk.com/financ...-b-u-font.html

    This applies to those responding to questions as well. (The thread is also over a year old.)

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