Question - At the start of the year, Triple T Company issued $6 million of 7% notes along with warrants to buy 400,000 shares of its $10 par value common stock at $18 per share. The notes mature over the next 10 years, starting one year from date of issuance, with annual maturities of $600,000. At the time, Triple T had 3,200,000 shares of common stock outstanding, and the market price was $23 per share. The company received $6,680,000 for the notes and the warrants. For Triple T, 7% was a relatively low borrowing rate. If offered alone, at this time, the notes would have been issued at a 20 to 24% discount.
Prepare journal entries for the issuance of the notes and warrants for the cash consideration received. Notes would have been issued at a 20% to 24% discount.