Prepare the journal entry to record exercise of warrants

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Problem - On November 3, 2020, AOC issued $400,000 of 8% bonds at 103. Attached to each $1,000 bond are 10 detachable stock warrants. On the issuance date, the bonds without the warrants sell in the market at 98 per bond.

a. Use the appropriate method to allocate the proceeds from the bond issuance, and prepare the journal entry to record the issuance.

b. The warrants entitle the holder to purchase one share of $2 par value common stock at $9. When the price of the stock equals $24, all warrants are exercised. Prepare the journal entry to record the exercise of the warrants.

Reference no: EM132919492

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