Answer:
a. Prepare the entry to record the issuance of the bonds and warrants
May 1, 2017, bonds issuance
Dr Cash 2,550,000
Dr Discount on bonds payable 25,000
Cr Bonds payable 2,500,000
Cr Additional paid in capital - stock warrants 75,000
b. Assume the same facts as part (a), except that the warrants had a fair value of $30. Prepare the entry to record the issuance of the bonds and warrants.
May 1, 2017, bonds issuance
Dr Cash 2,550,000
Cr Bonds payable 2,500,000
Cr Premium on bonds payable 20,000
Cr Additional paid in capital - stock warrants 30,000
Detachable warrants must be recorded separately than the bonds. They must be recorded as APIC stock warrants.
