Question

On April 7, 2021, Concord Corporation sold a $5400000, twenty-year, 9 percent bond issue for $5724000. Each $1000 bond has two detachable warrants, each of which permits the purchase of one share of the corporation's common stock for $30. The stock has a par value of $25 per share. Immediately after the sale of the bonds, the corporation's securities had the following market values:

9% bond without warrants	$1007
Warrants	21
Common stock	28

What accounts should Concord credit to record the sale of the bonds?

a. Bonds Payable $5400000 Premium on Bonds Payable 47628 Paid-in Capital—Stock Warrants 216972

b. Bonds Payable $5400000 Premium on Bonds Payable 94822 Paid-in Capital—Stock Warrants 229178

c. Bonds Payable $5400000 Premium on Bonds Payable 209411 Paid-in Capital—Stock Warrants 114589

d. Bonds Payable $5400000 Premium on Bonds Payable 324000

Answer 1

Accounts titles and Explanation	Debit ($)	Credit ($)
Cash	5,724,000
Bonds Payable		5,400,000
Premium On Bonds Payable(notes)		94,822
Paid in capital-Stock Warrants (42/1049)*5,724,000		229,178
Working notes:
	Ratio
Fair value of Warrant (21*2)	42
Add : Fair value of bond	1007
Total	1049
Allocated to bond (1007/1049)*5,724,000	5,494,822
Less : bonds payable	5,400,000
Premium	94,822

Therefore correct option is b.

Bonds Payable	$5,400,000
Premium on Bonds Payable	94,822
Paid-in Capital—Stock Warrants	229,178

I HOPE IT USEFUL TO YOU IF YOU HAVE ANY DOUBT PLZ COMMENT GIVE ME UP-THUMB. THANKS.....