On July 1, 2018, Ameri-Can Limited issued $3,000,000 of convertible bonds. The bonds pay annual interest of 10% on June 30. Each $1,000 bond is convertible into 75 common shares, at the investor’s option, between July 1, 2023, and July 1, 2028, at which time the bonds mature. The financial instrument was issued for total proceeds of $3,402,605, yielding 8%. The bonds without the conversion feature were valued at $2,660,987, yielding 12%. 

Ameri-Can also has a stock option plan. On October 1, 2018, the company issued 5,000 options to employees to buy common shares at $20 per share. An option pricing model valued these options at $50,000. The vesting period is five years. On December 31, 2018, $5,000 worth of options that had been granted in previous years expired unexercised. 

Ameri-Can has a December 31 year-end.

Required: 

a. Prepare the journal entry to record the issuance of the bonds on July 1, 2018. 

b. Prepare the journal entries to record the issuance and expiration of stock options.