On September 30, 2018, Pennsylvania Co. issued $3 million of 10%, 10-year convertible bonds maturing on September 30, 2028, with semi-annual coupon payments on March 31 and September 30. Each $1,000 bond can be converted into 80 no par value common shares. In addition, each bond included 20 detachable common stock warrants with an exercise price of $20 each. Immediately after issuance, the warrants traded at $5 each on the open market. Gross proceeds on issuance were $4.6 million (including accrued interest). Without the warrants and conversion features the bond would be expected to yield 6% annually. Pennsylvania's year-end is December 31.

1- Determine how Niagara should allocate the $4,600,000 proceeds into its components.

2- Prepare all the journal entries for fiscal year 2018.

3- Record the journal entry for the exercise of stock warrants on February 22, 2021.