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On July 1, 2020 Salem Corporation issued $3 million of 12% bonds payable in 10...

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Accounting

On July 1, 2020 Salem Corporation issued $3 million of 12% bonds payable in 10 years. Each bond is $1,000. The bonds pay interest semiannually. Each bond includes detachable warrants giving the bondholder the right to purchase for $30, one share of $1 par value common stock at any time during the next 10 years. The company sold the $3 million dollar bonds at 101. Shortly after the bond issuance, the warrants were selling for $70 apiece and the bonds were selling at 99.

Required:

  1. Prepare journal to record the issuance of the bonds.
  2. Prepare a journal entry if half of the warrants are exercised.

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