On September 1, 2017, Whispering Company sold at 104 (plus accrued interest) 5,8

Question

On September 1, 2017, Whispering Company sold at 104 (plus accrued interest) 5,880 of its 8%, 10-year, $1,000 face value, nonconvertible bonds with detachable stock warrants. Each bond carried two detachable warrants. Each warrant was for one share of common stock at a specified option price of $13 per share. Shortly after issuance, the warrants were quoted on the market for $3 each. No fair value can be determined for the Whispering Company bonds. Interest is payable on December 1 and June 1. Bond issue costs of $24,100 were incurred.

Prepare in general journal format the entry to record the issuance of the bonds. (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.)

Attached are Account Titles:

Bond Conversion Expense
Bond Interest Expense
Bonds Payable
Cash
Compensation Expense
Common Stock
Convertible Preferred Stock
Debt Conversion Expense
Discount on Bonds Payable
Income Summary
Incremental Cash
Insurance Expense
Interest Expense
Interest Payable
Interest Receivable
Liability under Stock Appreciation Plan
No Entry
Paid-in Capital in Excess of Par - Common Stock
Paid-in Capital in Excess of Par - Preferred Stock
Paid-in Capital-Expired Stock Options
Paid-in Capital-Stock Options
Paid-in Capital-Stock Warrants
Premium on Bonds Payable
Preferred Stock
Retained Earnings
Unamortized Bond Issue Costs
Unearned Compensation

Explanation / Answer

Account Title Debit Credit Cash $6,208,700.00 Unamortized Bond Issue Costs $24,100.00 Bonds Payable (5,880 X $1,000) $5,880,000.00 Premium on Bonds Payable—Schedule 1 $199,920.00 Paid-in Capital—Stock Warrants— Schedule 1 $35,280.00 Bond Interest Expense—Schedule 2 $117,600.00 (To record the issuance of the bonds) Schedule 1 Premium on Bonds Payable and Value of Stock Warrants Sales price (5,880 X $1,040) $6,115,200.00 Less: Face value of bonds $5,880,000.00 $235,200.00 Less: value assigned to stock warrants (5,880 x 2 = 11760 x $3) $35,280.00 Premium on bonds payable $199,920.00 Schedule 2 Accrued Bond Interest to Date of Sale Face value of bonds $5,880,000.00 Interest rate 8.00% Annual interest $470,400.00 Accrued interest for 3 months – ($470,400 X 3/12) $117,600.00

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