Convertible Debt- SHOW ALL CALCULATIONS (13 marks)

Nexus Ltd. issued convertible bonds on July 1, 2004.The $5,000,000 bonds pay annual interest of 8% each July 1 and mature on July 1, 2020.Each $1,000 bond is convertible into 50 common shares at the investor's option.Nexus received proceeds of $5,350,000 for the bond at issue date.The market (yield) rate is 9.5%.

Required:

a)Prepare the journal entry on Nexus' books at issuance using the incremental method.(4 marks)

b)Assume Nexus decided to repay (retire) the bonds early on July 1, 2008, after interest is recorded.Record the early repayment assuming Nexus pays investors $5,095,000 of which $925,225 is allocated to the conversion rights. (5 marks)

c)Instead of part b) assume investor's decided to convert 30% of their bonds at July 1, 2008, after interest is recorded.Record the conversion on Nexus' books.(4 marks)