Problem:
On May 1, 2014, Friendly Company issued 3,640 $1,000 bonds at 102. Each bond was issued with one detachable stock warrant. Shortly after issuance, the bonds were selling at 96, but the fair value of the warrants cannot be determined.
Required:
Question 1: Prepare the entry to record the issuance of the bonds and warrants.
Question 2: Assume the same facts as part (a), except that the warrants had a fair value of $22. Prepare the entry to record the issuance of the bonds and warrants.
Note: Please show how you came up with the solution.