Bond Issuance with Detachable Warrants: Accounting for Discount or Premium

To determine how Bonita Industries should record the bonds on May 1, 2018, we need to calculate the proceeds from the issuance of the bonds and the fair value of the detachable warrants.

The proceeds from the issuance of the bonds can be calculated as the face value of the bonds multiplied by the issue price percentage:

Proceeds from the issuance = Face value of bonds * Issue price percentage = $2,700,000 * 103% = $2,781,000

The fair value of the detachable warrants can be determined by multiplying the number of warrants by the fair value per warrant:

Fair value of the warrants = Number of warrants * Fair value per warrant = 20 * $2 = $40

To determine whether a discount or premium should be recorded, we need to compare the proceeds from the issuance of the bonds to the sum of the fair value of the bonds without the warrants and the fair value of the warrants.

Fair value of the bonds without warrants = Proceeds from the issuance - Fair value of the warrants = $2,781,000 - $40 = $2,780,960

Since the fair value of the bonds without warrants is less than the proceeds from the issuance, a discount should be recorded.

The discount can be calculated as the difference between the face value of the bonds and the fair value of the bonds without warrants:

Discount = Face value of bonds - Fair value of the bonds without warrants = $2,700,000 - $2,780,960 = $80,960

Therefore, Bonita should record the bonds with a discount of $80,960 on May 1, 2018. The correct answer is not provided in the given options, and none of the options match the calculated amount.