As discussed in the chapter, on August 11, 1998, Helix Hearing Care of America Corp. sold $2 million of convertible debentures. The debentures had a five-year term and a 13 percent coupon rate and were convertible into Helix common shares at CA$1.70. If Helix’s common stock were valued at $2.50 at conversion, what would be the financial statement effects of conversion under

(a) the book value method and

(b) the market value method? Which method do you consider best reflects the economics of the conversion? Why?

AppendixLO1