On May 1, 2010, Marly Co. issued $500,000 of 7% bonds at 103, which are due on April 30, 2020. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Marly's common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2010, the fair value of Marly's common stock was $35 per share and of the warrants was $2.
On May 1, 2010, Marly should record the bonds with a
a. discount of $20,000.
b. discount of $5,000.
c. discount of $5,600.
d. premium of $15,000.
Answer: C
Accounting
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