MN Company issued $5 million of $1,000 bonds at 103; each $1,000 bond included two warrants, with each warrant exercisable for one share of MN $10 par value common stock. 

Required—Prepare the journal entry that MN should have made to record the issuance of the bonds with the warrants under each of the following independent assumptions:

1. The warrants are nondetachable. MN’s underwriters estimated that without the warrants, each bond would have sold at 99; they further estimated the value of each warrant to be $55.

2. The warrants are detachable. MN’s underwriters estimated that without the warrants, each bond would have sold at 99; they further estimated the value of each warrant to be $55.

3. The warrants are detachable. MN’s underwriters estimated that without the warrants, each bond would have sold at 99; they were unable to estimate the value of each warrant.

4. The warrants are detachable. MN’s underwriters estimated that without the bonds, each warrant would have sold at $55; they were unable to estimate the value of each bond.

Answer rating: 100% (QA)

1 MN Company should have made the following journal entry to record the issuance of the bonds with t... View the full answer