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.

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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

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