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Issuance of Bonds with Warrants

Illiad Inc. has decided to raise additional capital by issuing
$170,000 face value of bonds with a coupon rate of 10%. In discussions with investment bankers, it was
determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of
one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be
$136,000, and the value of the warrants in the market is $24,000. The bonds sold in the market at issuance
for $152,000.

Instructions

(a) What entry should be made at the time of the issuance of the bonds and warrants?
(b) If the warrants were nondetachable, would the entries be different? Discuss.

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