Answer and Explanation:
The Journal Entries is shown below:-
1.
A. Issuance of the bonds by United
Cash Dr, $10,504,000
($10.10 million × 104%)
Discount on bonds payable Dr, (Diff) $858,500
To Bonds payable $10,100,000
To Stock warrants $
1,262,500
($10,100,000 ÷ $1,000 × 25 × $5)
(10,100 × 25 × $5)
(Being issue of bonds with warrants is recorded)
B. The investment by World
Investment in stock bonds Dr, $189,375
($1,262,500 × 15%)
Investment in bonds Dr, $1,515,000
($10.10 million × 15%)
To discount on bond investment $128,775
To Cash $1,575,600
($10.10 million × 104% × 15%)
(Being investment by W is recorded)
2.
To record the exercise of the warrants
Cash Dr, $1,931,625
(15% × 10,100 × $51 × 25)
Paid-in-capital - stock warrants outstanding $189,375
($1,262,500 × 15%)
To Common stock $189,375
(15% × 10,100 × 25 × $5)
To paid-in-capital in excess of par $1,931,625
(Being the conversion of bonds is recorded)
Investment in common stock Dr, $2,121,000
To Investment in stock warrants $189,375
To Cash $1,931,625
(15% × 10,100 × 25 × $51)
(Being the investment in common stock is recorded)
