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On December 31, Moss Co. issued $1 million of 11% bonds at 109. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitled the bondholder to purchase one share of $5 par common stock for $25. Immediately after issuance, the market value of each warrant was $4. On December 31, what amount should Moss record as discount or premium on issuance of bonds?

Respuesta :

letmeanswer

$110,000 discount amount should Moss record as discount or premium on issuance of bonds

Explanation:

Dr:  Cash                             $1,090,000

Dr:  Discount on bond          110,000

Cr:   Bonds payable          $1,000,000

Cr:    APIC - Warrants         200,000

If businesses have to collect funds, it is one way to issue bonds. A bond is a loan between an creditor and a business. In return for annual interest payments at fixed intervals, the creditors agree to give the company a certain sum of money for a specified period of time.

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