Question

On May 1, 2017, Ivanhoe Company issued 2,600 $1,000 bonds at 102. Each bond was issued with one detachable wock warrant. Shortly after Issuance, the bonds were seling at 99, but the fair value of the warrants cannot be determined () Prepare the entry to record the issuance of the bonds and warrants (Credite count foare automatically indented when entered Do not Indent manually. If no entry required, elect"No Entry for the account titles and enter for the amount.) Account Titles and Explanation Discount on ends Payable P in Capital Stock Warrants (b) Assume the same facts as part (a), except that the warrants had a fair value of $22. Prepare the entry to record the issuance of the bonds and warrants. (Credit account titles are automatically indented when amount is entered. Do not Indent manually. I try required select "No Entry for the account titles and enter for the mounts. Round Intermediate calculations to 5 decimal place .g. 1.24687 and inal answers to decimal place 5,125.) Discount on Bonds Payable Paid in Capital Stock Warrants

Answer 1

a
Account Titles and Explanation	Debit	Credit
Cash	2652000
Discount on Bonds payable	26000		=2600000*(1-0.99)
Bonds payable		2600000
Paid-in Capital-Stock Warrants		78000
b
Market value of Bonds	2574000		=2600000*0.99
Market value of Stock warrants	57200		=2600*22
Total Market value	2631200
Value allocated to Bonds	2594348		=2652000*2574000/2631200
Value allocated to Stock Warrants	57652		=2652000*57200/2631200
Account Titles and Explanation	Debit	Credit
Cash	2652000
Discount on Bonds payable	5652
Bonds payable		2600000
Paid-in Capital-Stock Warrants		57652