Concord Inc. has decided to raise additional capital by issuing $189,000 face value of bonds with a coupon rate of 9%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $131,750, and the value of the warrants in the market is $23,250. The bonds sold in the market at issuance for $152,500.
(a) What entry should be made at the time of the issuance of the bonds and warrants?
(b1) Prepare the entry if the warrants were nondetachable
|Discount on Bonds Payable||59375|
|Paid-in Capital - Stock Warrants (152500/155000)*23250)||22875|
|Discount on Bonds Payable||27500|
Working: Total market value = Market value of Bonds + Market value of Warrants
= $131,750 + $23,250
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