X Inc., uses ASPE and on January 1, 2021, issued 10-year convertible bonds with face value of $5,000,000 for $6,600,000. Each $1,000 bond can be converted at the option of the holder into 40 common shares. Each bond is also issued with ten warrants. Each warrant gives the holder the right to purchase five shares at a strike price of $20 per share. Similar warrants were being traded on the market at $6 each. The underwriter estimated the market value of the bonds alone, excluding conversion rights, to be 102. Interest is paid on January 1 and June 30.

Assume that the bonds are recorded with zero equity. The appropriate journal entry on the issuance of these bonds on January 1, 2021 would be:

a. DR Cash .......... $6,600,000; CR Bonds Payable ......... $5,100,000; CR Contributed Surplus - Warrants .......... $300,000; CR Interest Payable (or Interest Expense) .......... $1,200,000.

b. DR Cash .......... $6,600,000; CR Bonds Payable ......... $5,100,000; CR Contributed Surplus - Conversion Rights .......... $1,200,000; CR Interest Payable (or Interest Expense) .......... $300,000.

c. DR Cash .......... $6,600,000; CR Bonds Payable ......... $6,600,000.

d .DR Cash .......... $6,600,000; CR Bonds Payable ......... $5,100,000; CR Contributed Surplus - Conversion Rights .......... $1,100,000; CR Interest Payable (or Interest Expense) .......... $400,000.

e. None of the above .