Flounder Corporation issued 3,900, five year, 4% bonds at 104 on January 1, 2020. Interest is paid annually. Each $1,000 bond carried one detachable warrant allowing the holder to purchase 100 common shares in Flounder at $12 per share, the price at which Flounder shares were trading on the day of the sale of the bonds. Similar straight bonds trading on the open market paid 6%. On June 30, 2020, 780 of the bond holders exercised the options to buy the shares.

Prepare the journal entries to record these events. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

Jan. 1, 2020

Cash

4,056,000

Bonds Payable

x

Contributed Surplus - Stock Warrants

x

Jun. 30, 2020

Cash

936,000

Contributed Surplus - Stock Warrants

x

Common Shares

x

Answer rating: 100% (QA)

Step 11 Answer Contributed surplus is that the accounting t... View the full answer