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Prepare a record the issuance of the bonds by limbaugh

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Reference no: EM132487165

Point 1: On August 1, 2021, Limbaugh Communications issued $36 million of 12% nonconvertible bonds at 105. The bonds are due on July 31, 2041. Each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase, for $50, one share of Limbaugh Communications' no par common stock. Interstate Containers purchased 20% of the bond issue. On August 1, 2021, the market value of the common stock was $48 per share and the market value of each warrant was $8.

Point 2: In February 2032, when Limbaugh's common stock had a market price of $62 per share and the unamortized discount balance was $2 million, Interstate Containers exercised the warrants it held.

Required:

Question 1. Prepare the journal entries on August 1, 2021, to record (a) the issuance of the bonds by Limbaugh and (b) the investment by Interstate.

Question 2. Prepare the journal entries for both Limbaugh and Interstate in February 2032, to record the exercise of the warrants.

Question a. Record the issuance of the bonds by Limbaugh.

Question b. Record Exercise of the warrants for Limbaugh

Reference no: EM132487165

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