Maurice Tutor

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Category > Accounting Posted 20 Sep 2017 My Price 6.00

Western Company

Accounting for Stock Warrants

Western Company wants to raise additional equity capital. After analysis of the available options, the company decides to issue 1,000 shares of $20 par preferred stock with detachable warrants. The package of the stock and warrants sells for $90. The warrants enable the holder to purchase 1,000 shares of $2 par common stock at $30 per share. Immediately following the issuance of the stock, the stock warrants are selling at $9 per share. The market value of the preferred stock without the warrants is $85.

1. Prepare a journal entry for Western Company to record the issuance of the preferred stock and the attached warrants.

2. Assuming that all the warrants are exercised, prepare a journal entry for Western to record the exercise of the warrants.

3. Assuming that only 70% of the warrants are exercised (and the remaining 30% lapse), prepare the journal entries for Western to record the exercise and expiration of the warrants.

Answers

Maurice Tutor
(5)
Status NEW Posted 20 Sep 2017 02:09 PM My Price 6.00

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