Answer:
Journal Entry
Explanation:
The Journal Entry is shown below:-
1. Cash Dr, $19,618,250
Discount on bonds payable Dr, $606,750
To Bonds payable $20,225,000
(Being Bonds issued is recorded)
Working Note:-
Cash = ($20,225,000 × (97 ÷ 100)
= $19,618,250
So, the bonds has been issued a discount. The par value of the bonds is 100.
2. Cash Dr, $19,416,000
Discount on bonds payable Dr, $1,820,250
To Bonds payable $20,225,000
To Paid in capital share warrants $1,011,250
(Being bonds issued is recorded)
Working Note:-
The Value of bonds issued at a discount
So, value of bonds = ($20,225,000 × ($96 ÷ $100)
= $19,416,000
Now, Value of warrants = ($20,225,000 ÷ 100) × $5
= $1,011,250
Total value of bonds including warrants = Value of bonds + Value of warrants
= $19,416,000 + $1,011,250
= $21,236,250
3. Debt conversion expense Dr, $78,300
Bonds payable Dr, $10,342,000
To discount payable $58,600
To common stock $1,034,200
To paid in capital in excess
of common stock $9,249,200
To cash $78,300
(Being debt conversion is recorded)
