Question

A Company issued a bond payable with detachable warrants on January 1, 20X1 as follows. Bond payable ($1,000 par value; 400 bonds) $400,000 Coupon rate 4.70% Bond issue price $414,000 Fair value of the bonds after issuance $390,000 Term 10 years Number of detachable warrants per bond 50 Fair value of the warrants after issuance $2.00 Stock purchase price $15.00 Warrants exercised 5,000 Required: 1 warrant = 1 share of $1 par value stock 1) What is the interest expense in 20X1? 2) What is the credit to additional paid in capital at the time the warrants are exercised on June 30, 20X1?

Name: a company issued a bond payable with detachable warrants on january 1 20x1 as follows bond payable 1000 par value 400 bonds 400000 coupon rate 470 bond issue price 414000 fair value of the b 04875
Uploaded: 2022-05-12T05:13:27-08:00
Duration: 7 min 42 s
Channel: Aarti Kumari
Description: a company issued a bond payable with detachable warrants on january 1 20x1 as follows bond payable 1000 par value 400 bonds 400000 coupon rate 470 bond issue price 414000 fair value of the b 04875

          A Company issued a bond payable with detachable warrants on January 1, 20X1 as follows. 
Bond payable ($1,000 par value; 400 bonds)         $400,000 
Coupon rate                                                               4.70% 
Bond issue price                                                      $414,000
Fair value of the bonds after issuance                     $390,000 
Term                                                                         10 years 
Number of detachable warrants per bond                      50 
Fair value of the warrants after issuance                     $2.00 
Stock purchase price                                                  $15.00 
Warrants exercised                                                      5,000 
Required:
1 warrant = 1 share of $1 par value stock
1) What is the interest expense in 20X1?
2) What is the credit to additional paid in capital at the time the warrants are exercised on June 30, 20X1?

Added by Danielle E.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Aarti Kumari

05/12/2022

Step 1

Given: Face value of the bond = $1,000 Coupon rate = 4.70% Number of years = 10 Interest Expense = Face value of the bond x Coupon rate x Number of years Interest Expense = $1,000 x 4.70% x 10 Interest Expense = $1,000 x 0.047 x 10 Interest Expense = $470 x Show more…

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A Company issued a bond payable with detachable warrants on January 1, 20X1 as follows. Bond payable ($1,000 par value; 400 bonds) $400,000 Coupon rate 4.70% Bond issue price $414,000 Fair value of the bonds after issuance $390,000 Term 10 years Number of detachable warrants per bond 50 Fair value of the warrants after issuance $2.00 Stock purchase price $15.00 Warrants exercised 5,000 Required: 1 warrant = 1 share of $1 par value stock 1) What is the interest expense in 20X1? 2) What is the credit to additional paid in capital at the time the warrants are exercised on June 30, 20X1?