On March 1, 2018, E Corp. issued $1,000,000 of 10% nonconvertible bonds at 103, due on February 28, 2028. Each $1,000 bond was issued with 30 detachable stock warrants, each of which entitled the holder to purchase, for $50, one share of Evan's $25 par common stock. On March 1, 2018, the market price of each warrant was $4. By what amount should the bond issue proceeds increase shareholders' equity?

Question

Quizplus · Accepted Answer

Since no market value is given for the bonds, the amount attributable to the warrants (shareholders' equity) is $4 each × 30 warrants per bond = $120 × 1,000 bonds = $120,000.