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Gomez Company issues $7,800,000 of bonds with a coupon rate of 8%. To help the sale, detachable stock warrants are issued at the rate of
Gomez Company issues $7,800,000 of bonds with a coupon rate of 8%. To help the sale, detachable stock warrants are issued at the rate of ten warrants for each $1,000 bond sold. It is estimated that the value of the bonds without the warrants is $7,692,000 and the value of the warrants is $508,000. The bonds with the warrants sold at 101.
Journal Entry
DEBIT: Cash 7,878,000
DEBIT: Discount on Bonds Payable
CREDIT: Bonds Payable 7,800,000
CREDIT:Paid-in Capital-Stock Warrants
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