Grouper Inc. has decided to raise additional capital by issuing $199,000 face value of bonds with a coupon rate of 6%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $179,100, and the value of the warrants in the market is $23,880. The bonds sold in the market at issuance for $200,900.
Required:
a. What entry should be made at the time of the issuance of the bonds and warrants?
b. Prepare the entry if the warrants were nondetachable.
Answers: 2
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