Question

Eisler Corporation issued 2,000 $1,000 bonds at 101. 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 $40. 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.)

Answer 1

In the books of Eisler Corporation :

Cash ( 2,000 x 1,000 x 101 %) A/c Dr. 2,020,000

Discount on Bonds Payable A/c Dr. $59,216

To Bonds Payable 2,000,000

To Paid-in Capital : Stock Warrants 79,216

Workings:

Bond issue proceeds proportionately allocated to bonds:

`=2,020,000*(980)/(980+40)`

= 1,940,784.31

Discount on bonds payable = $ 2,000,000 - $1,940,784

= $59,216