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
(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.
Solution with step by step explanations.