Question

Carla Corporation issued 2,200 $1,000 bonds at 103. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $46.

Use the proportional 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. Round intermediate calculations to 5 decimal places, e.g. 1.24687 and final answers to 0 decimal places, e.g. 5,125.)

Account Titles and Explanation	Debit	Credit

Answer 1

Answer
the books of Carla Corporation:
Transaction	Account Titles	Debit	Credit
		$	$
1	Cash (2,200 x 1,000 x 103 %)	$2,266,000
	Discount on Bonds Payable	$     35,595
	Bonds Payable (2200*1000)		$2,200,000
	Paid-in Capital : Stock Warrants		$   101,595
Note:
Bond issue proceeds proportionately allocated to bonds: $ 2,266,000 x 980 / (980 + 46) = $ 2,164,405
Discount on bonds payable = $ 2,200,000 - $ 2,164,405 = $ 35,595