Illiad Inc. has decided to raise additional capital by issuing $183,100 face val
ID: 341205 • Letter: I
Question
Illiad Inc. has decided to raise additional capital by issuing $183,100 face value of bonds with a coupon rate of 12%. 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 $129,440, and the value of the warrants in the market is $32,360. The bonds sold in the market at issuance for $146,000.
(a) What entry should be made at the time of the issuance of the bonds and warrants?
Explanation / Answer
Cash 146000 Discount on Bonds payable 66300 Bonds Payable 183100 Paid-in Capital-Stock Warrants 29200 =146000/(129440+32360)*32360