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On March 1, 2021, E Corp. issued $1,000,000 of 10% nonconvertible bonds at 103, due on February 28, 2031. 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, 2021, the market price of each warrant was $4. By what amount should the bond issue proceeds increase shareholders' equity?

Respuesta :

Answer:

$120,000

Explanation:

The computation of increase shareholders' equity is shown below:-

Number of bonds issued = Total face value of bonds ÷ Face value per bond

= $1,000,000 ÷ $1,000

= 1,000 bonds

Increase in shareholders equity = Number of bonds × Share warrants per bond × Market price of each warrant

= 1,000 × 30 × $4

= $120,000

So, we have applied the above formula to determine the increase in shareholder equity.

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