Reference no: EM132722372

Question - Sheridan Inc. has $3 million of 8% convertible bonds outstanding. Each $1,000 bond is convertible into 30 no par value common shares. The bonds pay interest on January 31 and July 31. On July 31, 2020, the holders of $870,000 of these bonds exercised the conversion privilege. On that date, the market price of the bonds was 111, the market price of the common shares was $41, the carrying value of the common shares was $21, and the Contributed Surplus - Conversion Rights account balance was $424,000. The total unamortized bond premium at the date of conversion was $256,000. The remaining bonds were never converted and were retired when they reached the maturity date. Assume that the company follows IFRS.

Required -

a. Assuming that the book value method was used, record the conversion of the $870,000 of bonds on July 31, 2020.

b. Prepare the journal entry that would be required for the remaining amount in Contributed Surplus-Conversion Rights when the maturity of the remaining bonds is recorded.