Question

Garcia Co. issued bonds with detachable common stock warrants. Only the warrants had a known market value. Cash proceeds exceed the sum of the fair value of the warrants and the face amount of the bonds. This excess is reported as:

Answer 1

Discount on bond payable

Step-by-step explanation:

since in the question it is mentioned that the company has issued the common stock warrants also the cash proceeds is more than the sum of the fair value + face value

So we presume that the bond are to be sold at the discount

Therefore the excess should be reported as the discount on bond payable