Answer -
Account Titles and Explanation | Debit ($) | Credit ($) |
Cash Bonds Payable [5520 bonds * $1000 face value] Premium on Bonds Payable [Refer working note - (1)] Paid-in Capital--Stock Warrants [Refer working note - (1)] Bond Interest Expense [($5520000 * 8%) * 3/12] (To record the issuance of the bonds) |
5851200 - - - - |
- 5520000 187680 33120 110400 |
# Working note - (1) - Calculation of Premium on Bonds Payable and Value of Stock Warrants -
Particulars | Explanation | Amount ($) | |
I. | Sales price | (5520 bonds * $1000 face value) * 104% | 5740800 |
II. | Face value of bonds | 5520 bonds * $1000 face value | 5520000 |
III. | Value assigned to stock warrants | (5520 bonds * 2) * $3 | 33120 |
IV. | Premium on bonds payable | I - II - III | 187680 |
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