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When Cheery records interest expense on December

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Question - Cheery Company follows IFRS for the financial reporting. On January 1, 2015 Cheery issued 250 million euros of 10 year convertible notes that pay interest at 5% annually. Investors pay 250 million euros for the notes even though the company's credit risk at the time implies a 105 interest rate for traditional debit of similar duration. When the cash flows associated with the debt are discounted at 10%, the resulting value is 175 million euros.

When Cheery records interest expense on December 31, 2015 the entry will include a:

A) Debit to interest expense for 25 million euros

B) Credit to Convertible notes payable for12.5 million euros

C) Debit to Convertible notes payable for17.5 million euros

D) Credit to Convertible notes payable for 5 million euros

Reference no: EM132633633

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