Conroe Corporation sold $500,000 of 13% bonds at 107. Each $1,000 bond carried 20 warrants, and each

Question:

Conroe Corporation sold $500,000 of 13% bonds at 107. Each $1,000 bond carried 20 warrants, and each warrant allowed the holder to acquire one share of $10 par value common stock for $20 per share. Subsequent to the issuance of the securities, the bonds were quoted at 102 ex rights, and the warrants were quoted at $4 each.

Required

1. Determine the value to be assigned to the bonds and the warrants, and prepare the journal entry to record the issuance of the convertible bonds.

2. Assume that 4,000 warrants are subsequently exercised. Prepare the journal entry for the issuance of the common stock.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...