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Accounting for Issuing Warrants

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Capius Corporation issued 2000 bonds in 1000 individual denominations. Each bond has twenty detachable warrants. The bonds and warrants were sold at 110. At the time the bonds were issued each warrant had a market value to one percent of the face value on one bond. Capius will account for this transaction as:

A) Bond payable with an unamortized premium and a credit to additional Paid in Capital Warrants.

B) Bond payable with an unamortized premium and a debit to additional paid in Capital Warrants.

C) A bond payable with an unamortized discount and a credit to additional paid in Capital warrants

D) Bond payable with an unamortized discount and a debit to additional paid in Capital Warrants

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Solution Preview

In this case, the journal entry will be:

Cash 2,200,000 (2,000*$1,000*110/100 or ...

Solution Summary

This solution illustrates how to accounts for warrants issued with bonds.

$2.19