1.

Sylvian Company uses IFRS. The company is considering the issuance of convertible bonds. The bonds mature in 3 years, have a face value of $2,000,000 and pay interest annually at a rate of 6%. The net present value of the liability component is $1,896,912. Mr. Sylvian is curious as to the difference in accounting for these bonds if the company were to use US GAAP.

Instructions

(a) Prepare the entry to record issuance of the bonds at par under IFRS.

(b) Repeat the requirement for part (a), assuming application of US GAAP to the bond issuance.

(c) Which approach provides the better accounting? Explain.