Lang Co. issued bonds with detachable common stock warrants. Only the warrants had a known market value. The sum of the fair value of the warrants and the face amount of the bonds exceeds the cash proceeds. This excess is reported as

Question

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When the sum of the fair value of the warrants and the face amount of the bonds exceeds the cash proceeds, the difference is reported as a Discount on Bonds Payable. This is because the bonds were effectively issued at a price lower than their face value to account for the value of the detachable warrants.

Lang Co Issued Bonds with Detachable Common Stock Warrants