When Bonds Include Detachable Warrants, What Is the Appropriate Accounting

Multiple Choice

When bonds include detachable warrants, what is the appropriate accounting for the cash proceeds from the bond issue?

A) The proceeds from the bond issue are allocated between the bonds and the warrants on the basis of their relative market values.
B) The proceeds from the bond issue are allocated between the bonds and the warrants on the basis of their relative face values.
C) A nominal amount is allocated to the warrants.
D) All of the proceeds are allocated to the bonds.