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Show the carrying amount of the bond on initial recognition

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Reference no: EM133174757

Question - SRRA Bhd's financial year ends on 30 June. On 1 July 2015, SRRA Bhd issued RM10,000,000 convertible bond at its nominal value of RM1,000 each. The bond has a fixed interest rate of 6% per annum and will mature at the end of June 2019. Costs of issuing the bond, which included underwriting fees, totaled RM200,000. Each unit of the bond is convertible into 200 ordinary shares per RM1 at any time up to maturity. Any bond not converted by the maturity date will be redeemed for cash at its nominal value. At the date of issue of the bond, the prevailing interest rate of similar class of bond without the conversion option was 7%.

Note: The effective rate after the inclusion of transaction cost is 7.5913%.

Required -

a. Explain and show the carrying amount of the bond on initial recognition

b. Using the amortised cost model, produce an amortisation schedule for the bond that show the interest expense and the carrying amount.

c. show the journal entries for the following:

i. to record the issuing of bond

ii. to recognize interest expense and accretion of bond account.

Reference no: EM133174757

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