Answer:
September 1, 2017, bonds issued at a premium, + accrued interests, + stock warrants + issuance costs
Dr Cash 4,220,000
Dr Bond issuance costs 30,000
Cr Bonds payable 4,000,000
Cr Premium on bonds payable 136,000
Cr Additional paid in capital - stock warrants 24,000
Cr Interest payable 90,000
*Detachable warrants must be recorded separately than the bonds. They must be recorded as APIC stock warrants.
Explanation:
sales price of the bonds = $4,000,000 x 1.04 = $4,160,000
cost of the warrants = $3 x 2 warrants x 4,000 bonds = $24,000
premium on bonds payable = $4,160,000 - $4,000,000 - $24,000 = $136,000
bonds issuance costs (amortizable) = $30,000
accrued interests = $4,000,000 x 9% x 3/12 months = $90,000
total cash received = $4,160,000 + $90,000 - $30,000 = $4,220,000
