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imeducation corny nowy connect.ntmi returnons https%3A%2F%2Fconnect mheducation com%2Fpaamweb ups new connect Findexhtml%23%2 raded Exercises Saved On August 1, 2018, Limbaugh Communications issued $32 million of 12% nonconvertible bonds at 105. The bonds are due on July 31 2038. Each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase, for $40 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 $38 per share and the market value of each warrant was $10 In February 2029, when Limbaugh's common stock had a market price of $52 per share and the unamortized discount balance was $ 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. Complete this question by entering your answers in the tabs below Required 1 Required 2 Prepare the journal entries on August 1, 2018, to record (a) the issuance of the bonds by Limbaugh and (b) the investment by Interstate. (If no entry is required for a transaction/event, select No journal entry required" in the first account field Enter your answers in millions and round to 2 decimal places (.e., 5,500,000 should be entered as 5.50)) nces View transaction list Journal entry worksheet Record the issuance of the bonds by Limbaugh NoteEnter debts before ored Event General Journal Debit Prey 8of8Explanation / Answer
SOLUTION
1.
* Equity-Stock warrants = Market price per warrant * Number of warrant * Number of bonds
= $10 * 25 * ($32,000,000/$1,000)
= $10 * 25 * 32,000 = $8,000,000
2.
S.No. Date Accounts titkes and Explanation Debit ($) Credit ($) (A) Aug.1,2018 Cash (32,000,000*105%) 33,600,000 Discount on bonds payable (difference) 6,400,000 Bonds payable 32,000,000 Equity-Stock warrants* 8,000,000 (To record issuance of bonds by Limbaugh) (B) Aug.1,2018 Investment in stock warrants (8,000,000*20%) 1,600,000 Investment in bonds (32,000,000*20%) 6,400,000 Discount on bonds investment 1,280,000 Cash (33,600,000 * 20%) 6,720,000 (To record investment by interstate)Related Questions
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