On January 1, 2016, A company issued 100,000 cumulative preferred shares with a stated dividend of $3.00
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Question:
On January 1, 2016, A company issued 100,000 cumulative preferred shares with a stated dividend of $3.00 and received proceeds of $8,500,000. Buyers of the preferred shares also received a detachable warrant with each share purchased. Each warrant gives the holder the right to buy one common share at $20 per share within 10 years.
The preferred shares alone, excluding the conversion rights, are trading for $79 per share. The estimated value of the detachable warrants was $9 each.
Required:
- Allocate the equity to each component and record the journal entry for the issuance of these shares and warrants using the incremental method
- Assume 15,000 of the warrants are exercised on January 1, 2020
Related Book For
Financial Accounting Fundamentals
ISBN: 978-1259726910
6th edition
Authors: John Wild , Ken Shaw , Barbara Chiappetta
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