Question
On September 1, 2016, Schumpeter Conglomerates sold $250,000,000 20-year bonds with a coupon rate of 12% paid semi-annually. The market rate for a security of
On September 1, 2016, Schumpeter Conglomerates sold $250,000,000 20-year bonds with a
coupon rate of 12% paid semi-annually. The market rate for a security of similar risk and
maturity is 10%. Schumpeter Conglomerates hired Ivanov's Finance Shack to issue the securities
at a cost of $750,000. Attached to each $100,000 bond are five detachable warrants allowing for
the purchase of one hundred shares of no-par common stock for $25 per share. Each warrant is
estimated to have a market value of $20. Record journal entries for the issuance of the bond, the
first two interest payments, and any required adjusting entries for the fiscal year ending December 31, 2016.
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