Need response to the discussion post

Problem:

It is not unusual to issue long-term debt in conjunction with an arrangement under which lenders receive an option to buy common stock during all or a portion of the time the debt is outstanding. Sometimes the vehicle is convertible bonds; sometimes warrants to buy stock accompany the bonds and are separable.

Interstate Chemical is considering these options in conjunction with a planned debt issue.

"You mean we have to report $7 million more in liabilities if we go with convertible bonds? Makes no sense to me," your CFO said. "Both ways seem pretty much the same transaction. Explain it to me, will you?"

Explain:

1/ The differences in accounting for proceeds from the issuance of convertible bonds and of debt instruments with separate warrants to purchase common stock.

2/ The underlying rationale for the differences.

3/Arguments that could be presented for the alternative accounting treatment

Need the above response

Answer to second.I need the response in like I believe...

2/ An argument for the alternative accounting treatment of issuing convertible bonds or bonds with a warrant is that it would allow the company to sell bonds at a higher price so then they could get more cash to further their own companies' investments and operations. Something that comes with being able to sell the stock at a higher price would mean that there would also be a lower effective interest cost in selling the bonds. Not only will it be able to sell at a higher price, but it would also allow the company to obtain more cash if it was in debt or if it was just starting with less liquid and capital.