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Problem - Issuance of Bonds with Warrants

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Problem - Issuance of Bonds with Warrants

Illiad Inc. has decided to raise additional capital by issuing $170,000 face value of bonds with a coupon rate of 10%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $136,000, and the value of the warrants in the market is $24,000. The bonds sold in the market at issuance for $152,000.

Required -

1. What entry should be made at the time of the issuance of the bonds and warrants?

2. If the warrants were nondetachable, would the entries be different? Discuss.

Reference no: EM132454247

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