Question
Flounder Corporation issued 3,900, five year, 4% bonds at 104 on January 1, 2020. Interest is paid annually. Each $1,000 bond carried one detachable warrant
Flounder Corporation issued 3,900, five year, 4% bonds at 104 on January 1, 2020. Interest is paid annually. Each $1,000 bond carried one detachable warrant allowing the holder to purchase 100 common shares in Flounder at $12 per share, the price at which Flounder shares were trading on the day of the sale of the bonds. Similar straight bonds trading on the open market paid 6%. On June 30, 2020, 780 of the bond holders exercised the options to buy the shares.
Prepare the journal entries to record these events. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date | Account Titles and Explanation | Debit | Credit | ||
Jan. 1, 2020 | Cash | 4,056,000 | |||
Bonds Payable | x | ||||
Contributed Surplus - Stock Warrants | x | ||||
Jun. 30, 2020 | Cash | 936,000 | |||
| x | ||||
Common Shares | x |
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