On January 1, 2007 the London Corporation issued $500,000 of 11.5% bonds due January 1, 2017 at

Question:

On January 1, 2007 the London Corporation issued $500,000 of 11.5% bonds due January 1, 2017 at 102. The bonds pay interest semiannually on June 30 and December 31. Each $1,000 bond carried 20 warrants, and the exchange of two warrants allowed the holder to acquire one share of $10 par common stock for $50. Shortly after the time of issue, the bonds were quoted at 98 ex rights and each individual warrant was quoted at $5. Subsequently, on March 31, 2007, 8,000 rights were exercised.

Required

1. Prepare the journal entry to record the bond issue.

2. Prepare the journal entries on March 31, 2007 to record the exchange of the warrants for common shares.

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... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...