Tamarisk Corporation issued 2,100 $1,000 bonds at 101. Each bond was issued with

Question

Tamarisk Corporation issued 2,100 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling separately at 97. The market price of the warrants without the bonds cannot be determined.

Use the incremental method to record the issuance of the bonds and warrants. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Journal entries to record the issuance of the bonds and warrants.

Cash A/c Dr $ 21,21,000

Discount on Bonds Payable    A/c Dr $ 63,000

[$ 21,00,000 x (1 - .97)]

To Bonds Payable        A/c Cr $ 21,00,000

To Paid-in Capital—Stock Warrants         Cr $ 84,000**

** $ 21,00,000 x (1.01 - .97) = $ 84,000

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