The company issued 40,000 shares of 7%, $49 par preferred stock. Associated with
ID: 2520782 • Letter: T
Question
The company issued 40,000 shares of 7%, $49 par preferred stock. Associated with each share of stock was a detachable common stock warrant. Each warrant entitles the holder to purchase one share of the company's $1 par common stock for $20 per share. Each unit (one share of preferred stock and one warrant) was issued for $54. It is estimated that each warrant could have been issued for $3 if issued alone, and the preferred stock could have been issued for $51 if issued alone. Some time after the issuance, all of the warrants were exercised.
Make the journal entries necessary to record both (a) the issuance of the preferred stock-warrant units and (b) the subsequent exercise of the warrants.
a) the issuance of the preferred stock-warrant units cash $ 2,160,000 preferred stock 1960000 paid in capital in excess of par preferred ?? common stock ?? b) the subsequent exercise of the warrants cash ?? common stock warrants ?? common stock ?? paid in capital in excess of par common ??Explanation / Answer
Journal Entries: Date Accounts Titles Debit $ Credit $ a Cash 40000*54 2160000 Preferred Stock 40000*49 1960000 paid in capital in excess of par preferred 40000*2 80000 Common Stock Warrant 40000*3 120000 b Cash 40000*17 680000 Common Stock Warrant 40000*3 120000 Common Stock 40000*1 40000 paid in capital in excess of par common 40000*19 760000