[betsymc]

Attempting to do my homework and I can't seem to understand how to account for a premium when creating a journal entry for bond issuance with warrants.

I have the following:

Let me just copy the question and explain my confusion

On September 1, 2010, Jacob Company sold at 104 (plus accrued interest) 3,000 of its 8%, 10-year, $1,000 face value, nonconvertible bonds with detachable stock warrants. Each bond carried two detachable warrants. Each warrant was for one share of common stock at a specified option price of $15 per share. Shortly after issuance, the warrants were quoted on the market for $3 each. No market value can be determined for the Jacob Company bonds. Interest is payable on December 1 and June 1. Bond issue costs of $30,000 were incurred. Instructions Prepare in general journal format the entry to record the issuance of the bonds.

My computations:

fmv bonds 3000*1000*1.04 3,120,000
fmv warrants 3000*15*2 90,000
3,210,000

alloc bonds 2,915,888
alloc warrants 84,112
3,000,000


Cash 3,120,000
Premium on bond payable 120,000
Bond payable 3000000
Paid in capital -stock warrants 84112

If I had a discount the debits would balance to the paid in cap - stock warrant account. But with a premium, I just don't see how I should be handling this??

Any assistance, greatly appreciated

Thank You