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On September 21, 2010, The RG Co. issues $1,000,000 of bonds having a coupon rate of 6%.

On September 21, 2010, The RG Co. issues $1,000,000 of bonds having a coupon rate of 6%. To help the sale, detachable stock warrants are issued at the rate of ten warrants for each $1,000 bond sold. The fair market value of the warrants is $63,000. The bonds with the warrants sold at 101 plus accrued interest. Interest is payable on November 1st and May 1st. (Assume a 360 day year, i.e., 30-day months.)

Prepare the 9/21/10 entry for this transaction.

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Accounting-8100605.doc

Answer
Interest will be calculated for 144 days i.e. from 1 st May to 21st September.
Therefore the amount of Interest will be =$1,000,000 *6%*144/360
=$24,000
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