Hoffman Corporation issued $58.9 million of 5%, 11year bonds at 101.1. Each of the 58,900 bonds was issued with 13 detachable stock warrants, each of which entitled the bondholder to purchase, for $11, one share of $1 par common stock. At the time of sale, the market value of the common stock was $26 per share and the market value of each warrant was $14. Prepare the journal entry to record the issuance of the bonds.

Hoffman Corporation issued $58.9 million of 5%, 11year bonds at 101.1. Each of the 58,900 bonds was issued with 13 detachable stock warrants, each of which entitled the bondholder to purchase, for $11, one share of $1 par common stock. At the time of sale, the market value of the common stock was $26 per share and the market value of each warrant was $14.

Prepare the journal entry to record the issuance of the bonds. (Enter your answers in millions to onedecimal place. Omit the "$" sign in your response.)

General Journal Debit Credit

Cash 59.5

Discount on bonds payable 10.1

Bonds payable 58.9

Equity stock

warrants outstanding 10.7

rev: 02082011

Explanation:

The issue price of bonds with detachable warrants is allocated between the two different securities on the

basis of their market values.

Cash (101.1% × $58.9 million) = 59.5

Equity stock

warrants outstanding ($14 × 13 warrants × 58,900 bonds) = 10.7