Question

Cheyenne Corporation issued 1,700 $1,000 bonds at 103. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling separately at 98. The market price of the warrants without the bonds cannot be determined.

Use the incremental method to record the issuance of the bonds and warrants. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Solution:

Account Titles And Explanation	Debit	Credit
Cash [1700*1000*1.03]	$               1,751,000
Premium on Bonds Payable [Balancing Figure]	$                     34,000
Bonds Payable [1700*1000]		$               1,700,000
Paid-In-Capital-Stock Warrants [1700000*(103%-98%)]		$                     85,000
(To record bond and warrant issue)