Western Company wants to raise additional equity capital. After analysis of the available options, the company decides to issue 1,000 shares of $20 par preferred stock with detachable warrants. The package of the stock and warrants sells for $90. The warrants enable the holder to purchase 1,000 shares of $2 par common stock at $30 per share. Immediately following the issuance of the stock, the stock warrants are selling at $9 per share. The market value of the preferred stock without the warrants is $85.

1. Prepare a journal entry for Western Company to record the issuance of the preferred stock and the attached warrants.

2. Assuming that all the warrants are exercised, prepare a journal entry for Western to record the exercise of the warrants.

3. Assuming that only 70% of the warrants are exercised (and the remaining 30% lapse), prepare the journal entries for Western to record the exercise and expiration of the warrants.