Using the information provided in BE14- 30, prepare the journal entry to record the issuance of the bonds assuming that the incremental method is used and the market value of the warrants is not reasonably determinable.
In BE14-30
Crow Company issued 6,000 of its $ 1,000 par value bonds for $ 1,580, providing total cash proceeds of $ 9,480,000. The market price of Crow’s common shares on the date it issued the bonds is $ 20 per share. It sold the bonds with 240,000 detachable warrants to acquire 240,000 shares of the company’s $ 1 par value common stock for $ 20 per share. That is, each bond carries 40 warrants × 6,000 bonds = 240,000 shares. Crow has existing bonds outstanding that trade without warrants at $ 1,310. There are other Crow Company warrants outstanding that trade for $ 20 each. Prepare the journal entry to record the issuance of the bonds assuming that the proportional method is used.