On September 1, 2017, Cheyenne Company sold at 104 (plus accrued interest) 3,480

Question

On September 1, 2017, Cheyenne Company sold at 104 (plus accrued interest) 3,480 of its 9%, 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 $17 per share. Shortly after issuance, the warrants were quoted on the market for $2 each. No fair value can be determined for the Cheyenne Company bonds. Interest is payable on December 1 and June 1. Bond issue costs of $37,700 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.)

Account Titles and Explanation

Debit

Credit (there are only five accounts)

Account Titles and Explanation

Debit

Credit (there are only five accounts)

Explanation / Answer

Account Titles and Explanation Debit Credit Unamortized Bond Issue Costs $37,700 Cash {($3,480,000 x 104%)+($3,480,000 x 9%/12 x 3) - $37,700)} $3,659,800   Bonds Payable (3,480 x $1,000) $3,480,000   Premium on Bonds ($3,480,000 x 104% - $13,920) $125,280   Paid in Capital - Stock Warrants (3,480 x 2 x $2) $13,920 Interest Payable ($3,480,000 x 9%/12 x 3) $78,300

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