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Prepare the journal entries to record the issuance of bonds

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Reference no: EM13528017

On February 1, 20x1, Khan Inc. issued $4,000,000, 10-year, 12% bonds for $4,080,000. Each $1,000 bond had a detachable warrant for the purchase of one share of Khan's $40 common stock for $62. Immediately after the bonds were issued, Khan's securities had the following market values:

Common stock, $40 par $58
Warrant 10
12% bond without warrant 1,040

On July 15, 20x1, all stock warrants were exercised when the stock price was $75 per share.

Required:

Prepare the journal entries to record the issuance of bonds with stock warrants and exercise of the stock warrants.

Reference no: EM13528017

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