On July 1, 2014 Salem Corporation issued $3 million of 12% bonds payable in 10 years. Each bond is $10,000. The bonds pay interest semiannually. The bonds include detachable warrants giving the bondholder the right to purchase for $30, one share of $1 par value common stock at any time during the next 10 years. The company sold the bonds for $3 million. The value of the warrants at the time of issuance was $200,000.

1. Prepare journal to record the issuance of the bonds.

2. Prepare a journal entry if half of the warrants are exercised.