The stockholders’ equity section of Whaler Inc. at the beginning of the current year appears below.

Common stock, $1 par value, authorized 5,000,000
shares, 800,000 shares issued and outstanding	$ 800,000
Paid-in capital in excess of par—common stock	16,100,000
Retained earnings	260,000

During the current year, the following transactions occurred.

1. The company issued to the stockholders 500,000 rights. Ten rights are needed to buy one share of stock at $21. The rights were void after 30 days. The market price of the stock at this time was $22 per share.
2. The company sold to the public a $1,000,000, 6% bond issue at 106. The company also issued with each $1,000 bond a detachable stock purchase warrant, which provided for the purchase of common stock at $20 per share. Shortly after issuance, similar bonds without warrants were selling at 97 and the warrants at $10.
3. All but 75,000 of the rights issued in (1) were exercised in 30 days.
4. At the end of the year, 60% of the warrants in (2) had been exercised.
5. During the current year, the company granted stock options for 100,000 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $2.60. The option price is $25. The options were to expire at year-end and were considered compensation for the current year.
6. 20,000 shares related to the stock-option plan were exercised.

Instructions

Prepare general journal entries for the current year to record the transactions listed above.

Answer rating: 100% (QA)

Answers Notes Since the option price is more than options fair value hence there is no compensation ... View the full answer