Question

On April 7, 2010, Kegin Corporation sold a $2,000,000, twenty-year, 8 percent bond issue for $2,120,000. Each $1,000 bond has two detachable warrants, each of which permits the purchase of one share of the corporation's common stock for $30. The stock has a par value of $25 per share. Immediately after the sale of the bonds, the corporation's securities had the following market values:

8% bond without warrants $1,008
Warrants 21
Common stock 28
What accounts should Kegin credit to record the sale of the bonds?
a. Bonds Payable $2,000,000
Premium on Bonds Payable 77,600
Paid-in Capital—Stock Warrants 42,400
b. Bonds Payable $2,000,000
Premium on Bonds Payable 16,000
Paid-in Capital—Stock Warrants 84,000
c. Bonds Payable $2,000,000
Premium on Bonds Payable 35,200
Paid-in Capital—Stock Warrants 84,800
d. Bonds Payable $2,000,000
Premiums on Bonds Payable 120,000

Answer 1

Kegin Corporation should credit Bonds Payable, Premium on Bonds Payable, and Paid-in Capital—Stock Warrants to record the sale of the bonds.

Step-by-step explanation:

The correct accounts that Kegin Corporation should credit to record the sale of the bonds are:

• Bonds Payable $2,000,000
• Premium on Bonds Payable $35,200
• Paid-in Capital—Stock Warrants $84,800