What would be the effective interest rate

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Question - Convertible Bonds - Company X issues on 1/1/2021 a convertible bond with $100,000 face value, 8.2% coupon rate, and 10 years of annual payments on 12/31. The issuance price is $111,000. Market rate is 7%. The conversion option is that every $1,000 face value of bonds is converted to 85 shares. (Discount factors for 7% and 10 years: 0.5083 single sum, 7.0236 annuity). Answer the following:

a) If Company X uses IFRS, what would be journal entry on 1/1/2021 to record the issuance?

b) If Company X is using US GAAP, what would be journal entry on 1/1/2021 to record the issuance?

c) What would be the effective interest rate used in the bond's amortization schedule under IFRS and US GAAP?

d) The bond was converted on 1/1/2022 to common shares (assume the shares are no-par). Record the journal entry for the conversion under US GAAP and IFRS.

Reference no: EM133028003

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