Question

On July 1, 2012, Roberts Corporation issued $3,000,000 of 9% bonds payable in 20 years. The bonds include detachable warrants giving the bondholder the right to purchase for $30 one share of $1 par value common stock at any time during the next 10 years. The bonds were sold for $3,000,000. The value of the warrants at the time of issuance was $100,000.

Required:
A) Prepare the journal entry to record this transaction.

Answer 1

cash 3,000,000 debit

discount on BP 96,600 debit

bonds payable 3,000,000 credit

warrant on Stocks 96,600 credit

Explanation:

bonds face value 3,000,000

warrants 100,000

bonds weights: 3,000,000 / 3,100,000 = 0,9678

warrant weights: 100,000 / 3,100,000 = 0,0322

received 3,000,000

bonds 3,000,000 x .9678 = 2.903.400‬

warrant 3,000,000 x 0.0322 = 96.600‬

the difference to blaance the entry will be the bond discount.