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On August 1, 2024, Perez Communications issued $42 million of 10% nonconvertible bonds at 105. The bonds are due on July 31, 2044. Each $1,000
On August 1, 2024, Perez Communications issued $42 million of 10% nonconvertible bonds at 105.
- The bonds are due on July 31, 2044.
- Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $50, one share of Perez Communications no par common stock.
- Interstate Containers purchased 20% of the bond issue.
- On August 1, 2024, the market value of the common stock was $45 per share and the market value of each warrant was $5.
In February 2035, when Perez common stock had a market price of $59 per share and the unamortized discount balance was $1 million, Interstate Containers exercised the warrants it held.
Required:
- Prepare the journal entries on August 1, 2024, to record (a) the issuance of the bonds by Perez and (b) the investment by Interstate.
- Prepare the journal entries for both Perez and Interstate in February 2035, to record the exercise of the warrants.
A&B
A&B
Prepare the journal entries on August 1, 2024, to record (a) the issuance of the bonds by Perez and (b) the investment by Interstate. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions and round to 2 decimal places (i.e., 5,500,000 should be entered as 5.50). Journal entry worksheet B Note: Enter debits before credits. Prepare the journal entries for both Perez and Interstate in February 2035, to record the exercise of the warrants. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions and round to 2 decimal places (i.e., 5,500,000 should be entered as 5.50). Journal entry worksheet Record the exercise of the warrants for Perez. Note: Enter debits before creditsStep by Step Solution
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