Prepare journal entries for compound financial instrument

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Reference no: EM133189011

Question - Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes.

Izmir A.S. issued convertible bonds at their face value of 120,000 lira on December 31, 2020. The bonds have a 12-year life with interest of 9 percent payable annually. At the date of issue, the prevailing interest rate for similar debt without a conversion option was 11 percent.

Required -

a. Prepare journal entries for this compound financial instrument for the year ending December 31, 2020, under (1) IFRS and (2) U.S. GAAP.

b. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2020, conversion worksheet to convert IFRS balances to U.S. GAAP.

Reference no: EM133189011

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