Davis Company issued 11,250 of its $ 1,000 par value bonds for $ 1,310, providing total cash

Question:

Davis Company issued 11,250 of its $ 1,000 bonds for $ 1,310, providing total cash proceeds of $ 14,737,500. Davis did not incur any bond issue costs. Bond interest is paid annually. The market price of Davis’s common shares on the date the bonds were issued was $ 125 per share. The bonds were sold with 22,000 warrants to acquire 22,000 shares of the company’s $ 1 for $ 125 per share. Davis has existing bonds outstanding that trade without warrants at $ 1,200. There are other Davis warrants outstanding that trade for $ 87.50 each. The market value of the company’s bonds is considered more reliable than the trading price of the warrants.
Required
a. Prepare the journal entry to record issuance of the bonds assuming that the warrants are non detachable.
b. Prepare the journal entry to record the issuance of the bonds assuming that the warrants are detachable using the proportional method.
c. Prepare the journal entry to record the issuance of the bonds assuming that the warrants are detachable using the incremental method.
d. Assuming that the proportional method is used, prepare the journal entry required to record the exercise of all warrants.
e. Assuming that the incremental method is used, prepare the journal entry required to record the exercise of all warrants. Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...