1.On January 1, 2019 Willows Corporation issued $20 million of 5% coupon, convertible bonds at 102. The bonds pay interest on June 30 and December 31^st and mature in 10 years.Each $1,000 bond is convertible into 25 shares of Willow's no par common stock.Bonds that are similar in all respects, except that they are nonconvertible, were currently trading at 99. (that is, 99% of face value).

a.Prepare the journal entry to record the issuance of these bonds.(Assume Willows prepares its financial statements under US GAAP).

b.Solve for the effective interest rate on these bonds. (Hint:You know PV, Pmt, FV and N; you can solve for I).You can round this interest rate to 2 decimal places.

c.Using the effective rate from b, do amortization table that covers the first four coupon payments related to these bonds.

d.On January 1, 2021, immediately after the fourth coupon payment, 10% of the bondholders elected to convert their bonds to common stock.Prepare the journal entry for this conversion.

e.Extra Credit:If Willow's reported under IFRS instead of US GAAP, prepare the journal entry for the original issuance of these bonds on January 1, 2019, and compute the effective interest rate on the bonds.