Exercise 16-8 On September 1, 2017, Larkspur Company sold at 104 (plus accrued i

Question

Exercise 16-8 On September 1, 2017, Larkspur Company sold at 104 (plus accrued interest) 3,360 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 $15 per share. Shortly after issuance, the warrants were quoted on the market for $3 each. No fair value can be determined for the Larkspur Company bonds. Interest is payable on December 1 and June 1. Bond issue costs of $30,300 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 Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

SOLUTION

Journal Entry-

Schedule 1- Premium on Bonds Payable and Value of Stock Warrants

Schedule 2 Accrued Bond Interest to Date of Sale-

Accounts title and Explanation Debit ($) Credit ($) Cash 3,539,700 Unamortized Bond Issue Costs 30,300 Bonds Payable (3,360 * $1,000) 3,360,000 Premium on Bonds Payable -Schedule 1 114,240 Paid-in Capital- Stock Warrants - Schedule 1 20,160 Bond Interest Expense -Schedule 2 75,600 (To record issuance of bonds)

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