Question
On January 1st 2020, the Watkins Company issued (sold) 100 $1000, 8% bonds for a 1150. Each of the bonds contained a detachable warrant that
On January 1st 2020, the Watkins Company issued (sold) 100 $1000, 8% bonds for a 1150. Each of the bonds contained a detachable warrant that can be used to purchase a share of Watkins stock for $50. The value of each warrant is $5.
REQUIRED:
a) Make the journal entry when the bonds with the warrants are issued.
b) Make the journal entry when the warrants are redeemed and the stock is issued.
c) When the first interest payment is made July 1 2020, will interest expense be greater than, equal to, or less than the amount of the interest check?
d) In total how much interest will Watkins pay on this bond issue?
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield
13th Edition
9780470374948, 470423684, 470374942, 978-0470423684
