Answer: Please refer to Explanation
Explanation:
Using the proportional method, we will first calculate the bond issue proceeds proportionally allocated to bonds:
= 2,000 * 1,000 * 101% * 980/(980+41)
= $2,020,000 * 980/(980+41)
= $1,938,883.45
Then calculating the discount on bonds payable we have,
= $2,000,000 - $1,938,883.45
= $61,116.55
Journalizing them we have,
DR Cash (2,000*1,000*101%) $2,020,000
DR Discount on Bonds Payable $61,116.55
CR Bonds Payable (par value) $2,000,000
CR Paid-in Capital Warrants $81,116.55
( To record issuance of Bonds)
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