Twixt Corp. issued $5,210,000 of convertible bonds on 1 January for $4,995,000 cash. The bond had the following terms:

• Bonds mature in five years’ time.
• Annual interest, 5%, is paid each 31 December.
• Bonds are convertible to 521,000 common shares at maturity or can be repaid in cash. This choice is up to Twixt Corp.

Current market interest rates are 6%.


(PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)

Required:
1. Assign a value to the liability and the equity portions of the bond. (Round time value factor to 5 decimal places and final answers to the nearest dollar amount.)

Return to questlon 3. Liability portion Equity portion S 1,097,321 X S 4,990,536 10 polnts 2. Provide the journal entry to record Issuance of the bond. (If no entry is requlred for a transaction/event, select "No Journal entry requlred" In the first account fleld. Round time value factor to 5 decimal places. Round your final answers to the nearest dollar amount.) X Answer is complete but not entirely correct. No Transaction General Journal Debit Credit 1 1. Cash 4,995,000 Interest liability on bond 1,097.321 X Share equity - bond 3,897,679 X 3. Provide a schedule to show Interest expense and amortization of the llability over the life of the bond. (Round time value factor to 5 declmal places. Round your final answers to the nearest dollar amount. Leave no cell blank. Be certain to enter "O" wherever requlred.) X Answer is complete but not entirely correct. Beginning balance Interest Liability 1,097,321 X s Ending Interest Liability Year Interest Payment 1 65,839 S 260,500 S 902,660 902,660 X S 54,160 VS 260,500 VS 696,320 3 696,320 X S 41,779 VS 260,500 $ 477,599 4 S 477,599 X S 28,656 S 260,500 S 245,755 X IS 245,755 X S 14,745 S 260,500 O Mc Graw Prey 3 of 2