IV. On February 1, 20x1, Khan Inc. issued $4,000,000, 10-year, 12% bonds for $4,080,000. Each...
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IV. On February 1, 20x1, Khan Inc. issued $4,000,000, 10-year, 12% bonds for $4,080,000. Each $1,000 bond had a detachable warrant for the purchase of one share of Khans $40 common stock for $62. On the issuance date, Khans securities had the following market values:
Common stock, $40 par $58
Warrant 10
12% bond without warrant 1,040
On July 15, 20x1, all stock warrants were exercised when the stock price was $75 per share.
Required: Prepare the journal entries to record the issuance of bonds with stock warrants and exercise of the stock warrants.
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