Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1.On January 1, 2019, Legion Memorial Corporation issued $20 million of nonconvertible bonds at 105.The bonds have a 4% coupon rate and mature in 10

1.On January 1, 2019, Legion Memorial Corporation issued $20 million of nonconvertible bonds at 105.The bonds have a 4% coupon rate and mature in 10 years.Each $1,000 bond was issued with 15 detachable stock warrants, each of which entitled the holder to purchase one share of Legion's no-par common stock for $25.Immediately after issuance, the separate market value of the warrants was $5.

a.Prepare the journal entry for Legion to record the issuance of these bonds.

b.Calculate the effective interest rate for the bond component (only) of this financial instrument. (Again, you know PV, Pmt, FV and N; you can solve for I).You can round this interest rate to 2 decimal places.

c.Using the effective rate from b., do an amortization table that covers the first four coupon payments on this bond.

d.On January 1, 2021, assume that holders of 50,000 of the stock warrants elect to exercise these options and buy Legion common stock.Prepare the journal entry for this transaction.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Statements

Authors:

1st Edition

1423223853, 9781423223856

More Books

Students also viewed these Accounting questions