Question

# Anteater Company issued 100 bonds, each with a face amount of \$1,000, with nondetachable stock warrants...

Anteater Company issued 100 bonds, each with a face amount of \$1,000, with nondetachable stock warrants at 101. Each warrant entitled its holder to acquire one share of \$100 par common stock for \$120 per share. Through discussion with investment bankers, it is determined that the bonds would sell for 97 without the warrants. The market value of each warrant is \$50.

1.Record the journal entry for the issuance of the bonds.

 General Journal Debit Credit Cash 101,000 Discount on Bonds Payable 3,951 Bonds Payable 100,000 Paid-in Capital—Stock Warrants 4,951 Working Total proceeds = \$100,000 x 1.01 = \$101,000 Market value of warrants = 100 warrants x \$50 = \$5,000 Market value of bonds w/o warrants = \$100,000 x .97 = \$97,000 Proceeds Allocated to warrants: \$5,000 x \$101,000/\$102,000 \$4,951 Proceeds allocated to bonds: \$96,049 \$97,000 x \$101,000/\$102,000

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