5. (26 Marks) Part A-14 Marks I) For each of the unrelated transactions described below, present the entry(ies) required to record the bond transactions. 1. Wally, Inc. decides to issue convertible bonds instead of common shares. The company issues 9% convertible bonds with a maturity value of $7,000,000, at 103. The investment banker indicates that if the bonds had not been convertible they would have sold at 101 2. Sally Ltd. issues $5,000,000 of bonds with a coupon rate of 6%. To help the sale, detachable stock warrants are issued at the rate of 20 warrants for each $5,000 bond sold. It is estimated that the value of the bonds without the warrants is $4,644,000 and the value of the warrants is $606,000. The bonds with the warrants sold at 102. Use the proportional method to value each instrument. II) Give one reason why a company would rather choose to issue convertible bonds over pure debt bonds? III) Give one reason why a company would rather choose to issue convertible bonds over common shares when raising capital? Part B - 12 Marks On November 30, 2016, Div-Corp declared a total dividend of $5,000,000 to preferred and common shareholders. The dividend is to be paid on January 15. 2017 to shareholders of record on December 15, 2016. On November 30, 2016 there were 180,000 Preferred shares outstanding which carry a $6 dividend per share. The preferred shares are cumulative, participating and non-voting. Prior to the dividend declaration the preferred share dividend was 3 years in arrears. The paid-in value of the preferred shares was $10,000,000 and the paid in value on 900,000 common shares outstanding was $35,000,000. Required: Prepare journal entries for ALL events described above (round to the nearest dollar)