The Highland Company issued bonds with a face value of 600,000. (There are 600 $1,000 bonds.) Attached to each $1,000 bond are two stock warrants giving the holder the right to buy 2 shares of stock (1 share per warrant) at $20 per share. The fair value of the warrants is determined to be $10 per warrant (there are 1,200 warrants). The fair value of the bonds WITHOUT the warrants is determined to be $588,000.

Required:

1) Prepare the journal entry (or entries if you use multiple entries) for the issuance of the bonds assuming cash received is $575,000.

2) Prepare the journal entry (or entries if you use multiple entries) for the issuance of the bonds assuming cash received is $610,000.

3) For Part two above, prepare the journal entry if, two years later, 60% of the warrants are exercised. And a $10 par value per share for common stock.