On January 1, 2017, United Corporation issued $10 million of 8% bonds at 105 (coupon payments are to be made annually at the end of the year). The bonds mature in 10 years. Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $50, one share of United common stock. On January 1, 2017, the market value per share for United stock was $48.00 and the market value of each warrant was $5.50.
Scenario 2
On January 1, 2017, assume that straight debt without detachable warrants with similar risk characteristics as the bonds are trading at 97% of face value. Prepare the journal entry on January 1, 2017 to record the issuance of the bonds and stock warrants by United. Also provide the appropriate citation (including excerpts) from FASB ASC in support of your accounting.