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On December 31, 2019, Armada Company issued 5,000,000 face amount, 5 year bonds at 109.  Each 1,000 bond was issued with 10 share warrants, each of which entitled the bondholder to purchase one share of 100 par value at 120.  Immediately after issuance, the market value of each warrant was 5. The stated interest rate on the bonds is 11% payable annually every December.  However the prevailing market rate of interest for similar bonds without warrants is 12%. The present value of 1 at 12% for 5 periods is 0.57 and the present value of an ordinary annuity of 1 at 12% for 5 periods is 3.60. Prepare the entry to record the exercise of the warrants.

On December 31, 2019, Armada Company issued 5,000,000 face amount, 5 year bonds at 109.  Each 1,000 bond was issued with 10 share warrants, each of which entitled the bondholder to purchase one share of 100 par value at 120.  Immediately after issuance, the market value of each warrant was 5. The stated interest rate on the bonds is 11% payable annually every December.  However the prevailing market rate of interest for similar bonds without warrants is 12%. The present value of 1 at 12% for 5 periods is 0.57 and the present value of an ordinary annuity of 1 at 12% for 5 periods is 3.60. Prepare the entry to record the exercise of the warrants.

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 1RE
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 On December 31, 2019, Armada Company issued 5,000,000 face amount, 5 year bonds at 109.  Each 1,000 bond was issued with 10 share warrants, each of which entitled the bondholder to purchase one share of 100 par value at 120.  Immediately after issuance, the market value of each warrant was 5.

The stated interest rate on the bonds is 11% payable annually every December.  However the prevailing market rate of interest for similar bonds without warrants is 12%.

The present value of 1 at 12% for 5 periods is 0.57 and the present value of an ordinary annuity of 1 at 12% for 5 periods is 3.60.

Prepare the entry to record the exercise of the warrants.

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