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Prepare the journal entry to record the bond issue

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Question - On January 1, 2016, Berlin Corporation issued $500,000 of 11.5% bonds due January 1, 2023, at 102. The bonds pay interest semiannually on June 30 and December 31. Each $1,000 bond carried 20 warrants, and the exchange of two warrants allowed the holder to acquire one share of $10 par common stock for $50. Shortly after the time of issue, the bonds were quoted at 98 ex rights and each individual warrant was quoted at $5. Subsequently, on March 31, 2016, 8,000 rights were exercised.

Required:

1. Prepare the journal entry to record the bond issue.

2. Prepare the journal entries on March 31, 2016, to record the exchange of the warrants for common shares.

Reference no: EM132234160

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