Question 1 (Issuance of bonds with share warrants):

On January 1, 2021, Rio Corporation issued $8 million of 8% nonconvertible bonds at 102. The bonds are due on December 31, 2024 (4 years). Each $1,000 bond was issued with 4 detachable share warrants, each of which entitled the bondholder to purchase, for $28, one share of Rio Corporation's ordinary shares. Leia Co. purchased 25% of the bond issue. On January 1, 2021, the market value of the ordinary shares was $36 per share and the market value of each warrant was $8. On March 1, 2023, when Rio Corporation's ordinary shares had a market price of $40 per share, Leia Co. exercised the warrants it held.

Required:

1. Prepare the journal entries on January 1, 2021, to record the issuance of the bonds by Rio Corporation.

2. Prepare the journal entries for Rio Corporation on March 1, 2023, to record the exercise of the warrants by Leia Co.