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Issuance of the bonds by comenius corporation

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Reference no: EM131064008

On August 1, 2016 Comenius Corporation issued $10 million of 8% bonds at a price of 105. The bonds mature in 20 years. Each bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $50, one share of Comenius Corporation’s $5 par common stock. United Brethren Corporation purchased 10% of the bond issue. On August 1, 2016, the market value per share for Comenius Corporation stock was $56 and the market value of each warrant was $6. In March 2023, when Comenius Corporation stock had a market price of $70 per share and the unamortized premium balance was $300,000, World exercised the warrants it held.

Required:

1. Prepare the journal entries on August 1, 2016, to record (A) the issuance of the bonds by Comenius Corporation and (B) the investment by United Brethren Corporation.

2. Prepare the journal entries for both companies in March 2023 to record the exercise of the warrants by United Brethren Corporation. (Comenius Corporation 100%, United Brethren Corporation 10%)

Reference no: EM131064008

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