I have to prepare the journal entries for the books of HB Inc. to account for the investments throughout the year. Here is the pertinent information:
On 6/30/07 HB invested in 20,000 securities' units of JKM. Each securities' unit cost $22 in total and comprised one common share of JKM and two stock warrants. Each stock warrant is convertible at the option of the holder into one common share on payment of the exercise price of $12 at any time within the next three years. HB designated the common shares as an available for sale investment. The warrants are to be accounted for as derivatives.

Immediately after the issue of the securities' units, the common share price of JKM without the rights to the warrants was $12. The warrants are not publicly traded.

Further info needed about JKM's shares for use in the option valuation model (Black Scholes). The company's shares have a historical volatility of 71%. The company does not pay dividends and the risk free interest rate is 4.8%. Assume that these variables apply throughout the year.

On 9/30/07 HB sold 10,000 common shares when the price was $15. It also exercised 10,000 warrants at that date. The common shares acquired were designated as available for sales securities.

On December 31, 2007 the common stock price of JKM was $16.

Using the Black Scholes model I came up with an value of $8.38

The first journal entry is on 6/30/07 with a debit to investment of JKM and a credit to cash for $440,000.
I don't know how to record the warrants on 6/30