Final answer:
The excess of the fair value of warrants and face amount of bonds over cash proceeds from bonds with detachable stock warrants should be reported as 'Premium on Bonds Payable,' using the concept of Present Discounted Value for calculation.
Step-by-step explanation:
When Lang Co. issued bonds with detachable common stock warrants, and only the warrants had a known market value, the scenario described involves accounting for the allocation of proceeds between the bonds and the warrants. The excess of the sum of the fair value of the warrants and the face amount of the bonds over the cash proceeds should be reported as a Premium on Bonds Payable. This premium arises because the market has assigned a value to the detachable warrants, making the effective selling price of the bonds higher than their face amount.
The present value of the bonds is calculated using the concept of Present discount value (PDV), which is the worth of a stream of expected future payments in today's dollars, using an appropriate discount rate to account for the time value of money. For example, if we expected a future payment from a bond or a dividend from a stock, we would discount that payment back to present value to determine how much it is worth to us today.