The company issued 40,000 shares of 7%, $50 par preferred stock. Associated with each share of stock was a detachable common stock warrant. Each warrant entitles the holder to purchase one share of the company's $1 par common stock for $20 per share. Each unit (one share of preferred stock and one warrant) was issued for $55.
It is estimated that each warrant could have been issued for $3 if issued alone, and the preferred stock could have been issued for $52 if issued alone. Sometime after the issuance, all of the warrants were exercised. Make the journal entries necessary to record both the issuance of the preferred stock-warrant units and the subsequent exercise of the warrants.