Question

On September 1, 2017, Stellar Company sold at 104 (plus accrued interest) 4,560 of its 9%, 10-year, $1,000 face value, nonconvertible bonds with detachable stock warrants. Each bond carried two detachable warrants. Each warrant was for one share of common stock at a specified option price of $17 per share. Shortly after issuance, the warrants were quoted on the market for $2 each. No fair value can be determined for the Stellar Company bonds. Interest is payable on December 1 and June 1. Bond issue costs of $24,600 were incurred.

Prepare in general journal format the entry to record the issuance of the bonds.

Answer 1

JOURNAL ENTRIES IN THE BOOKS OF STELLAR COMPANY
particulars			Debit	Credit
Cash a/c Dr (4560*1000*104%)+(4560000*9%*3/12)-24600			$           48,20,400.00
to bonds Payable (4560*1000)				$           45,60,000.00
to premium on bond payable				$             1,39,560.00
to paid in capital- stock warrants (4560bonds *2 warrants* $2)				$                 18,240.00
to interest expenses /interest payable (4560000*9%*3/12)				$             1,02,600.00
( being issusance of bond payable recorded)