On August 1, 2014, Barbet, Inc. issued $10 million of 9% convertible bonds at 103. The bonds mature in 10 years. Each $1,000 bond was issued with 10 detachable stock warrants, each of which entitled the bondholder to purchase, for $30, one share of Barbet $1 par common stock. Zuchon, Inc. purchased 15% of the bond issue. On August 1, 2014, the market value per share for Barbet stock was $28 and the market value of each warrant was $4.
In March 2020, when Barbet common stock had a market price of $55 per share and the unamortized premium balance was $140,000, Zuchon exercised all of the warrants it held.
Instructions:
Prepare the journal entry on August 1, 2014, to record the issuance of the bonds by Barbet.
Prepare the journal entry for Barbet in March 2020 to record the exercise of the warrants by Zuchon.