Berkley Corp. issued $3,000,000 ($1,000 each) of 9%, 5-year convertible bonds on March 31, 2023 for $3,388,500. The bonds were dated March 31, 2023 with interest payable March 31 and September 30. The effective rate of interest when the bonds had been issued was 8%. Tilley has a fiscal year end of September 30^th and follows IFRS.

On October 1, 2024, $1,000,000 of these bonds were converted into 23,000 no par common shares. As interest had been paid on September 30, 2024, there was no accrued interest at the time of conversion.

Required:

Prepare journal entries for the following transactions

March 31, 2023. The issuance of the bonds assuming the residual approach is used.

September 30, 2023 Payment of the interest.

October 1, 2023 Conversion of $ 1,000,000 of the bonds into 23,000 no par value common shares, using the book value (carrying value) method.

Part B

On January 1, 2023, Melody Inc. granted 20,000 stock options to the executives of the company. Each option allows an executive to purchase one share of Melody Inc.s common shares at a price of $10 per share.

The options can only be exercised beginning January 1, 2025 by executives who were still employed with the company. The options expire January 1, 2027.

On the grant date, January 1, 2023, the shares of Melody Inc. were trading at $13. A fair value pricing model determined total compensation to be $180,000.

Required: Prepare journal entries for the following transactions.

January 1, 2023 Issuance of the options

December 31, 2023 Year-end adjusting entry

June 10, 2026 One-quarter of the options were exercised.