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Prepare the journal entry to record the conversion

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Question - On Jan 01, 2020, ACME Incorporated issued $10 million of 6% convertible bonds at 100, which are due on December 31, 2029. The bonds pay interest semi-annually on June 30 and December 31. Each $1,000 bond can be converted to 20 common shares by at the discretion of the bondholder at any interest payment date. Similar bonds without the conversion feature are trading in the market at 8%. Assume that ACME follows IFRS.

Required -

1. Prepare the journal entry for the issuance of the bonds.

2. Prepare the journal entry to record the conversion of 40% of the bonds on June 30, 2025. The carrying value after the interest payment was $9,256,467.

3. Prepare the journal entry to retire the bonds at maturity assuming that no other conversions took place.

4. What options would be available to the company if ACME followed ASPE?

Reference no: EM133134217

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