On July 1, 2019, Salem Corporation issued $3.2 million of 10% bonds payable in 10 years. The bonds pay interest semiannually. The bonds include detachable warrants giving the bondholder the right to purchase for $32, one share of $1 par value common stock at any time during the next 10 years. Salem sold the bonds for $3.2 million. The value of the warrants at the time of issuance was $128,000. Required: Prepare in general journal format the entry to record the issuance of the bonds.
On July 1, 2019, Salem Corporation issued $3.2 million of 10% bonds payable in 10 years. The bonds pay interest semiannually. The bonds include detachable warrants giving the bondholder the right to purchase for $32, one share of $1 par value common stock at any time during the next 10 years. Salem sold the bonds for $3.2 million. The value of the warrants at the time of issuance was $128,000. Required: Prepare in general journal format the entry to record the issuance of the bonds.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On July 1, 2019, Salem Corporation issued $3.2 million of 10% bonds payable in 10 years. The bonds pay interest semiannually. The bonds include detachable warrants giving the bondholder the right to purchase for $32, one share of $1 par value common stock at any time during the next 10 years. Salem sold the bonds for $3.2 million. The value of the warrants at the time of issuance was $128,000.
Required:
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Prepare in general journal format the entry to record the issuance of the bonds.
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Expert Solution
Step 1
Bonds: It is an instrument or tool of indebtedness of the bond issuer to the bondholders. Regular interest is provided by the issuer to the lender on face value.
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